Markets
BSE See NSE See 39,116.68
70.34 (0.18%)
collapse Related Readings collapse

Premier Explosives - Expect A Big Bang

By Prasanna Bidkar | 7/4/2011 5:15 PM Monday

There are some counters that hardly get to the attention of investors despite having a good value. We have been doing this job of exploration for our readers and this time we are recommending Premier Explosive Limited (PEL) which manufactures detonators and bulk explosives. The compelling factors include good financial performance of the company in FY11, its consistent dividend paying history which provides a current cum-dividend yield of 2.66% and finally an expected growth in volumes due to an increasing demand from the mining companies as well as the defence sector.

Additonally, some amount of improvement in realisation is also expected.  On the valuation front its CMP of Rs 74 discounts its FY11 earnings by 6x which is much lower than the 21x commanded by Solar Explosives which is also into the bulk explosive business. Even its EV/EBITDA of 3.58 seems to be attractive.

PEL manufactures bulk explosives, detonators and other products like Boostex, CL-20 KG, HNS and propellants. As far as its revenue contribution is concerned, 38% comes from bulk explosives, 30% from detonators and the rest comes from the other products. Similar is the contribution at the EBITDA levels. As regards growth from its different segments, the company expects a major volume upsurge to come from the bulk explosive segment with good demand being generated by the coal mining and other mining companies. With clarity seen emerging on the Go & No-Go Areas’ front from the Ministry of Environment, some volume growth is expected. In the detonators segment, the management has stated that a few years back the company had initiated the production of propellants and other products for supply to defence establishments and has proved itself as a reliable supplier, meeting the stringent quality parameters. There are two factors that are expected to drive its positive performance. The first is the Union Budget 2011-12 that has provided for an 11% hike in the defence allocation. Secondly, under the new Defence Production Policy 2011, preference will be given to indigenous design, development and manufacture of defence equipment. Both the factors are likely to result in volume growth.

PEL is also into exports and earned around Rs 5.50 cr revenues in FY11 from outside of India.  For FY12 the company expects its exports to increase by 50% and touch a level of Rs 8 cr. While there is the assumption of volume growth, realisations are not expected to improve much. Further, being a seasonal business, Q1FY12 will not be good on the financial front. So rather than buying at one go, one can accumulate the stock over a period of one quarter.

The company has been paying dividend on a consistent basis since FY04 and with Rs  2 per share dividend for FY11, the cum-dividend yield stands at 2.66%. So this is an added advantage. On the financial front, the performance was very good and it posted topline of Rs 95.13 cr and bottomline of Rs 10.02 cr as compared to Rs 89.71 cr and Rs 5.94 cr respectively in FY10. With volume growth of more than 15% and a marginal increase in prices, the company may post topline of Rs 110 cr and bottomline of Rs 11.50 cr, resulting into an EPS of Rs 14.15 and a P/E of 5.30. This provides good scope for upward movement and hence we recommend a ‘buy’ on the counter with a target price of Rs 90.

 

Find More Articles on: Research, Fundamental Picks, DSIJ Magazine, Low Priced Scrip, Product, Small Cap

news letter

More for the early bird.

Get the post-market reports and breakfast news right in your inbox. See latest »

DSIJ Mindshare

Markets may open with a gap-up riding on global optimism

Karan DSIJ / Article rating: 5.0

The outlook for the Indian markets is a gap-up opening on the back of optimism in the global markets. The US and China will restart trade negotiations to reach a deal, Also, the ECB President surprised the markets by hinting at more stimulus if needed. At the time of writing, the SGX Nifty was trading higher by 50 points at 11,762.

12345678910Last

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Logistics sector will play a vital role in making the concept of ‘Make in India’ a success. This will be further aided by some of the recent steps taken by Government of India such as granting of infra sector status to logistics sector.

Best and worst Performing Sector Funds of Year 2017

Best and worst Performing Sector Funds of Year 2017

As the year-end has approached most of you are eager to know the mutual fund movers and shakers of the year 2017. Read on to find the performance of various sector dedicated funds.

Markets may start positive, but volatility likely due to F&O expiry

Markets may start positive, but volatility likely due to F&O expiry

The start of the F&O expiry day is likely to be in the green, but volatility may creep in with the progress of the session. The SGX Nifty suggests that the Nifty could open at 10,525 with gains of 32 points at the opening bell. 

Pidilite announces buyback of Rs 500 crore

Pidilite announces buyback of Rs 500 crore

The buyback offer comprises purchase of up to 50,00,000 equity shares. The buyback offer size comprises 0.975 per cent of the total paid-up equity capital of the company.

Bank Nifty drags markets to close in the red

Bank Nifty drags markets to close in the red

The late session fall in Bank Nifty changed the direction of the market, leading to a marginal fall in the benchmark indices. Bank Nifty yet again resisted at its multiple point downward sloping trendline level at 25733.

Six major underperforming MF schemes having higher expense ratios

Six major underperforming MF schemes having higher expense ratios

Mutual funds with a large size of assets under management (AUMs) are supposed to have lower expense ratios. However, there are schemes with large AUMs but having higher expense ratios and generating lower returns. 

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma index has come in as the healer in an otherwise sluggish market. Index has given a consolidation breakout at the 9420 level today and if the it sustains 9420, followed by 9628 on the upside, it has a long way to go.

Ten stocks close to their 52-week low

Ten stocks close to their 52-week low

Following stocks are close to their 52-week low as at 12.35 p.m. on December 27.

Ten stocks close to their 52-week high

Ten stocks close to their 52-week high

The markets on December 27 opened gap down. BSE Sensex is trading at 34,068.15, up by 57.54 points and the Nifty is trading at 10,539.45, up by 7.95 points.

Five stocks with selling interest

Five stocks with selling interest

Overall volumes in futures & options currently stand at 62.75 lakh contracts with a turnover of Rs. 5,19,204.72 crore.