Not a buy recommendation
Precision wire CMP 162:
Precision Wires India Limited (PWIL), manufactures copper winding wires, continuously transposed conductors (CTC) and paper insulated copper conductors (PICC) which are used in manufacturing of rotating as well as static electrical equipments. PWIL has a manufacturing facility located at Silvassa, Dadra Nagar Haveli and Palej, Gujarat with a total installed capacity of 40,000 metric tonne per annum (MTPA) as on November 30, 2020. PWIL is a leading player in the organized copper winding wires in India. The company caters to various industries like power, auto, consumer durables, transformers, construction etc.
Financial
- ROE and ROCE is around 11% and 20% respectively (Average)
- P/BV - 1.2, Face Value - INR 5
- Forward PE is around 11 which is fair as per industry benchmark.
- Promoter holding 59.7% which is strong and stable. Being a small company no FIIs and DIIs holding.
- FY20 topline was around INR 1,526 Cr Vs. 1,758 Crs therefore decreased by 13.2% in YoY.
- FY20 PAT was around INR 32 Crs Vs. 42 Cr therefore declined by 24% in YoY.
- Q2FY21 topline was around 393 Crs Vs. 369 Crs in Q2FY20 therefore strong recovery after Q1FY21.
- Q2FY21 PAT was around INR 10 Crs Vs. 8 Crs in Q2FY20 therfore up by 25% in YoY.
- Operating profit margin in FY20 was around 5% and same in FY19 and Q2FY21.
Key Positives/Strength
- PWIL continues to be leading player in the organized copper winding wires with a total installed capacity of 40,000 MTPA as on November 30, 2020. The company caters to various reputed Original Equipment Manufacturing (OEM) companies in India and abroad. By virtue of servicing these OEMs, the company has developed long term business relationship.
- Reduced the debt by QoQ by more than 15 Crs. Continuous decline in total debt leading to improvement in overall gearing to below 0.50x on sustained basis.
- Company has a strong liquidity supported by cash and bank balance of Rs.22.76 crore as on September 30, 2020; also company has liquid investments of Rs.23.50 crore. The company’s average fund-based working capital utilisation during past 12 months is low at 15%.
- Increasing Copper Prices in last 5-6 months and sharply recovered from March 2020 low
Risk/Weakness
- The scale of operations declined from Rs.1,758 crore in FY19 to Rs.1,529 crore in FY20; this was as expected due to subdued demand in power and automobile sector.
- Low margin product and its around only 4-6% There are a large number of players in the industry including many in SSI sector; due to which there is competition prevalent in the industry.
- Operating cash flows was impacted in FY20.
View Share is currently trading at 162 with all time high at 320 on June 2018 currently discounted at 50% from their peak. Share is currently at bullish zone can add some quanity here and if it correct 140-145 add more target can be 180/210 in short term SL 120. Small Micro cap share so trade it accordingly.