Premier Explosives Ltd
BSE Code:526247
CMP: Rs.32.5
EPS: Rs.5.75
Dividend: 15%
Market Cap: Rs.26.41 Cr
Performance: Market Performer
Target: Rs.75--Rs.80 in 6 months time frame
CMP: Rs.32.5
EPS: Rs.5.75
Dividend: 15%
Market Cap: Rs.26.41 Cr
Performance: Market Performer
Target: Rs.75--Rs.80 in 6 months time frame
Introduction: Premier Explosives Limited (PEL) is a Rs. 700 million plus company and is one of the major manufacturers of the entire range of Explosives and Accessories in India. PEL was established in 1980 and is the first manufacturer in India to deploy totally indigenous technology. PEL today has the widest range of products and technologies in the manufacture of Explosives & Accessories. These include Emulsion and Slurry explosives, LD cartridge explosives, Bulk Explosives, Small-dia non-permitted explosives, Permitted explosives, Cast Boosters, Pillow-packs for secondary blasting; Detonating Fuse of various core-loads, Plain detonators, Instantaneous Electric Detonators, Electric Delay Detonators, Permitted Detonators, Cord Relays and Amardet NoN Electirc Shock-tube Detonators.
PEL has constantly innovated and upgraded its products and technology to offer “state-of-the-art” products to its valued customers both in India and abroad. Commitment to quality, Safety, Health & Environment are the way of life at PEL.PEL’s R &D facility is recognized by the Centre for Scientific and Industrial Research (CSIR), Government of India, as an established research centre. It is also recognized as a research base for Ph.D. work by the Osmania University, Andhra Pradesh.
A wide distribution network comprising of magazines Consignment Agents, Dealers and Handling Agents, located across the country, ensure ready stock and prompt delivery to customers even in remote locations.
Shareholding Pattern: The Promoters' holding is 35.42% while the general public holds 64.58%. Among the public an individual in the name of Mr.Atim Kabra have around 6.16% shares of the company. This gentleman has constantly increased stake in the company in the last few months.
Financials: For Q3FY08, the results were quite impressive considering that there were NO Revenues coming from the Mushroom Division. Mushroom Division was sold last year for a considerable sum which were used to clear off some old debts.
For Q3FY08, the total income of the company was Rs.15.40 Cr as against Rs.16.6 Cr. The Net profits of the company for Q3FY08, without the inputs from the mushroom division is also impressive at Rs.77.3 lakhs against Rs.79.4 laksh in Q3FY07. The EPS of the company for the the 9 (nine) months ending 31st December, 2008 is Rs.5.67 which gives a natural target of Rs.75--Rs.80 on the scrip. The total EPS of the company for FY08 would be around Rs.7-Rs.8, which is quite high if we consider its nearest peer Solar Explosives Ltd.
Triggers:
1. It has reduced its debt burden with the money from the selling of the Mushroom division last year. The company striving to achieve a zero debt company in the near future.
2. Special Product Division dedicated for defence sector for production of Solid Propellants was completed during the year and was commissioned on 16th September, 2006. The Company is now mainly focussed on the Lucrative Defence Sector.
3. The Company has established two Joint Ventures (JV) abroad for manufacture of explosives and accessories. At one JV the production has commenced in April 2007. The second JV commenced production during July / August 2007. Both JVs making good good contribution during this financial year, FY08.
3. The Comapny earlier signed a 10 years (renewable for another 10 years) prestigious contract with Satish Dhawan Space Centre, SHAR, Indian Space Research Organisation (ISRO). The contract is for operation and maintenance of Second Propellant Plant at an annual value of about Rs. 70 million with price escalation on annual basis. The total value of contract would be around Rs. 700 millions. The operations have commenced from 18th January, 2007.
4. In the last fiscal the Premier Explosives Ltd got the following awards:
a) The Company has been awarded Appreciation Certificate by Andhra Pradesh Pollution Control Board in the category of Best Greenbelt Industries.
b) It has also received award of achieving highest rating in the ranking of India's Top 500Manufacturing Small and Mid Sized companies during August, 2006.
c) Naval Science & Technological Laboratory, D.R.D.O., Visakhapatnam, has presented Appreciation Award to the Company in recognition of its valuable contribution to them in the development of various specialized products.
d) Premier Explosives Ltd has also received Certificate of Appreciation by Rotary Club in appreciation of company's service and support for Drinking Water Project and organization of medical camps in remote villages around twin cities.
5. The Indian explosive industry is one of the few highly developed ones in the world. The total consumption of explosives in India is amongst the first five in the world.The total market had been increasing steadily due to infrastructure development and more demand of key minerals and power. This increases the chance of this well established player to improve both on the top and the bottomlines. The company is moving at a rapid pace.
6. Explosives production in some of the countries had been monopolised by global giants like Orica, Dyno, UEE etc. This Company has established two joint ventures abroad to take advantage of better margins. Production has already commenced in one Joint Venture from 17th April, 2007. The production at second Joint Venture is has started during July, 200. Major contribution is coming from special products division, overseas ventures and operations and maintenance contracts during the financial year 2007-08. So there are multiple revenue streams of the company. Hence the scrip is expected to cross Rs.100 this time.
7. The company, one of the three in the country manufacturing the entire range of explosives and accessories for the civil/industrial requirement, is poised to become a defence/strategic industry supplier through capacity expansion, including missile fuel. Premier Explosives, which already produces the fuel, would double its capacity in about 12 months time frame. For the new project, it has already bought 150 acres of land off Hyderabad, near its existing plant, The complete capex plan is almost ready.
8. Q3FY08 results were good considering that there was not income from the Mushroom Division in view of it being sold in the last Fiscal. Both the toplines and the bottomlines were flat, speaking Q-o-Q. This a GREAT ACHIEVEMENT as this was achieved only from the income from its core divisions, i.e. manufacture of explosives. The net profits margins have also increased marginally. This is going to improve going forward as the incomes from the overseas subsidiaries adds up to the total income of the company.
Shareholding Pattern: The Promoters' holding is 35.42% while the general public holds 64.58%. Among the public an individual in the name of Mr.Atim Kabra have around 6.16% shares of the company. This gentleman has constantly increased stake in the company in the last few months.
Financials: For Q3FY08, the results were quite impressive considering that there were NO Revenues coming from the Mushroom Division. Mushroom Division was sold last year for a considerable sum which were used to clear off some old debts.
For Q3FY08, the total income of the company was Rs.15.40 Cr as against Rs.16.6 Cr. The Net profits of the company for Q3FY08, without the inputs from the mushroom division is also impressive at Rs.77.3 lakhs against Rs.79.4 laksh in Q3FY07. The EPS of the company for the the 9 (nine) months ending 31st December, 2008 is Rs.5.67 which gives a natural target of Rs.75--Rs.80 on the scrip. The total EPS of the company for FY08 would be around Rs.7-Rs.8, which is quite high if we consider its nearest peer Solar Explosives Ltd.
Triggers:
1. It has reduced its debt burden with the money from the selling of the Mushroom division last year. The company striving to achieve a zero debt company in the near future.
2. Special Product Division dedicated for defence sector for production of Solid Propellants was completed during the year and was commissioned on 16th September, 2006. The Company is now mainly focussed on the Lucrative Defence Sector.
3. The Company has established two Joint Ventures (JV) abroad for manufacture of explosives and accessories. At one JV the production has commenced in April 2007. The second JV commenced production during July / August 2007. Both JVs making good good contribution during this financial year, FY08.
3. The Comapny earlier signed a 10 years (renewable for another 10 years) prestigious contract with Satish Dhawan Space Centre, SHAR, Indian Space Research Organisation (ISRO). The contract is for operation and maintenance of Second Propellant Plant at an annual value of about Rs. 70 million with price escalation on annual basis. The total value of contract would be around Rs. 700 millions. The operations have commenced from 18th January, 2007.
4. In the last fiscal the Premier Explosives Ltd got the following awards:
a) The Company has been awarded Appreciation Certificate by Andhra Pradesh Pollution Control Board in the category of Best Greenbelt Industries.
b) It has also received award of achieving highest rating in the ranking of India's Top 500Manufacturing Small and Mid Sized companies during August, 2006.
c) Naval Science & Technological Laboratory, D.R.D.O., Visakhapatnam, has presented Appreciation Award to the Company in recognition of its valuable contribution to them in the development of various specialized products.
d) Premier Explosives Ltd has also received Certificate of Appreciation by Rotary Club in appreciation of company's service and support for Drinking Water Project and organization of medical camps in remote villages around twin cities.
5. The Indian explosive industry is one of the few highly developed ones in the world. The total consumption of explosives in India is amongst the first five in the world.The total market had been increasing steadily due to infrastructure development and more demand of key minerals and power. This increases the chance of this well established player to improve both on the top and the bottomlines. The company is moving at a rapid pace.
6. Explosives production in some of the countries had been monopolised by global giants like Orica, Dyno, UEE etc. This Company has established two joint ventures abroad to take advantage of better margins. Production has already commenced in one Joint Venture from 17th April, 2007. The production at second Joint Venture is has started during July, 200. Major contribution is coming from special products division, overseas ventures and operations and maintenance contracts during the financial year 2007-08. So there are multiple revenue streams of the company. Hence the scrip is expected to cross Rs.100 this time.
7. The company, one of the three in the country manufacturing the entire range of explosives and accessories for the civil/industrial requirement, is poised to become a defence/strategic industry supplier through capacity expansion, including missile fuel. Premier Explosives, which already produces the fuel, would double its capacity in about 12 months time frame. For the new project, it has already bought 150 acres of land off Hyderabad, near its existing plant, The complete capex plan is almost ready.
8. Q3FY08 results were good considering that there was not income from the Mushroom Division in view of it being sold in the last Fiscal. Both the toplines and the bottomlines were flat, speaking Q-o-Q. This a GREAT ACHIEVEMENT as this was achieved only from the income from its core divisions, i.e. manufacture of explosives. The net profits margins have also increased marginally. This is going to improve going forward as the incomes from the overseas subsidiaries adds up to the total income of the company.
Conclusion: Considering the above mentioned factors it has been found that the stock is trading cheap as compared to its peers. This is is one of the most inflation Neutral sector as the Company gets substantial orders from Defence Departments, where the demand is inelastic. The fact that the Company's revenues have started to come from overseas subsidiaries is a good point as compared to its peer Solar Explosives. In the daily Charts also the scrip looks good for investment. Buy with a Price Target of Rs.75--Rs.80 in the short to medium terms perspective.
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