Recommendation from metal non ferrous sector
This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.
PRECISION WIRES INDIA LTD :WIRED FOR GROWTH
HERE IS WHY
✓Strong financial performance
✓Huge growth opportunity
✓Resilient business operations
Precision Wires India Ltd (PWIL) was established in 1989 by Atlas Wires Ltd (Atlas) and was merged with Atlas in 2001 to be one of the successful companies operating in wire industry of India. Today, it is the largest producer of winding wires in South Asia. The company has an installed capacity of over 45000 MT/year, which was increased from 35000 MT/year in 2019. It manufactures a wide range of products, including enameled round and rectangular copper winding wires, continuously transposed conductors (CTC) and paper/mica/nomex® insulated copper conductors (PICC), which are used across the globe by the electrical and electronics industries.
The company recorded net sales of ₹ 1718.6 cr in FY21 compared to ₹ 1526 cr in FY20, a growth of nearly 12.6 per cent. In fiscal 2021, the input prices for copper were inflated, causing the prices to rise. This resulted in lower sales volume, but the higher prices led to increased revenue. The EBIDTA stood at ₹ 83 cr in FY21 as against ₹ 77 cr in the previous fiscal, which again reflects a growth of over 7.8 per cent. Also, the PAT came in strong at ₹ 39.3 cr as compared to ₹ 32 cr in FY20, witnessing a high growth of 22.8 per cent.
The cash flows from operating activities increased 27.9 per cent from ₹ 48 cr in FY20 to ₹ 61.4 cr in FY21. Net sales for the quarter ended September 21 stood at almost ₹ 708.85 cr, which grew by 33.4 per cent on a QoQ basis and 80.24 per cent on YoY basis. The EBITDA (exclusive of other income) was nearly ₹ 30 cr, a rise of 23.9 per cent QoQ and 53.4 per cent YoY. The net profit stood at ₹ 15 cr, a jump of 29.33 per cent QoQ and 49.63 per cent YoY.
On the returns front, the ROE and ROCE stood at 13.13% and 20.46%, respectively. The stock is trading near the price-to-earnings multiple of 24.4. The stock has been a multibagger of the year. It has delivered fabulous return of 270% on a trailing 12-months basis.
One crucial aspect of the company’s business model is that this capital goods company is highly focused on production and sale of only one product, namely, winding wires made of copper. These days companies prefer diversification which many a time may not be fruitful. As a shareholder, you can diversify your portfolio by adding a company that sticks to its core business.
The government’s thrust on energy efficient electrical equipment would spur replacement demand of older, less efficient equipment which augurs well for the company. Even though the anti-subsidy duty imposed by the Government of India led to a sharp decline in the imports of copper wire from ASEAN FTA countries, the company showed resilience in its operations and, being an experienced player, made sufficient alternative arrangements for its main raw material copper.
Due to its low debt gearing ratio, sufficient liquidity in the books, rich experience in the sector, it holds a strong position in the market and, therefore, we expect it to perform well in the long term. By virtue of these factors, we recommend our reader-investors to BUY the scrip.
