Pix transmissions - low profile microcap company

(Rajeev Jawahar) #21

Pix Transmissions came out with a great set of Q4 numbers. As I am not sure about the sustainability of Q4 margins, I am taking the profitability margins for the entire year 17-18 to average it out. The Company seems to have completed its current phase of expansion & is possibly reaping its benefits. The high operating margins have sustained / improved & this has led to a disproportionate growth in profitability with even marginal growth in Sales, as mentioned in my post September 24, 2017.

The expansion has been completed at an opportune time. The effects of GST implementation / demonetization have clearly been absorbed by the system & the economy seems to be returning to its earlier growth trajectory as the recent GDP numbers seem to indicate. This pick up should logically result in decent sales growth in the current year & with its high operating margins, we could see another disproportionate year of growth in profitability. A 15% top line growth in 18-19, could result in an EPS of about Rs. 20 for the year.

Despite its high margins, the stock is still available at about 10% higher than its book value of about Rs. 138 as on March 31, 2018

There could additionally be another pleasant surprise in store. These numbers pertain to the stand alone Co. It also has a couple of subsidiaries abroad. These subsidiaries are marketing Co.’s & their profitability has not yet been factored in.

(AbhijitMani) #22

Another decent quarter with the sales in Q1 just a tad bit lower than the Q4 .
@RajeevJ : Would love to hear your take on this quarter’s performance :slight_smile:

(Rajeev Jawahar) #23

Yes indeed Pix did not disappoint! What was heartening for me were the continued high operating margins. This itself could potentially re-rate the stock. The Co. could end up with a PAT in the vicinity of about 37 crs for the current year & despite the recent run up is still available at a market cap of 270 crs.

Perhaps this story would appear more attractive to investors at higher levels!!

(ASG) #24

Rubber production is in a bad shape due to Kerala floods… Could anyone detail how this might affect Pix’s performance in the current quarter?

(cool_gaurav) #25

Extract from Latest Annual Report- CMD Letter. I see lot of potential…We are making our plant fully automated…

(cool_gaurav) #27

As far as my knowledge is concerned,synthetic rubber is mostly used which is rightly mentioned by you.

(Rajeev Jawahar) #28

Pix is finally coming on the investor’s radar as the market cap increases! Even though the stock has more than doubled since I first wrote about it on this thread about a year back last September, it is ironically cheaper today in terms of multiple than it was a year ago!

Pix can go on to do PAT of about 37 crs with an EPS of about 27-28, making it available in single digit multiple for the current year 18-19, despite the recent run up. This story has just begun & with the unabated growth both in Sales as well as in its operating margins, it’ll come as no surprise if this stock continues on its upward trajectory over the next year or so. The mgt. on its part has been consistently ploughing back a part its retained earnings every year into enhancing capacity with should come in handy now with the pick up in the economy.

(ASG) #29

Will the increase in oil prices negatively impact their margins since synthetic rubber is a buy product of crude oil?

(Lokesh) #32

I’m a newbie investor and I’m trying to analyze this company.

Can some experienced people please help me understand these?

  1. Does Pix have any pricing power? (seeing the past data suggests, their margins are heavily dependent on the synthetic rubber prices)
  2. How to estimate potential future growth of the top line? (what is the current capacity utilization they have?)

(shanid) #34

I have looked at this company in detail and i found one negative.

Maintenance capex for automation and addition of new technology

Below is the details of capex done in last 4 years.

FY 15 - 38 cr
FY 16 - 18.82 cr
FY 17 - 16.56 cr
FY 18 - 28.25 cr

Company top line have not grown much during this last 4 years (180 to 250 cr).

Company also claiming that their capacity under utilized and without capex they can do 400 cr revenue.

One time automation projects we can understand but why this is recurring every year.
This sucks their cash flow and evident from the debt (apprx 100 cr).Company unable to reduce the debt in line with their operating profit bcz of this maintenance capex.

Also there is an element of other income which boosted their last 2 quarter PAT.

Without understanding the growth in other income better not to factor it in EPS estimates for the year.

Shanid VH

(Rashid Cherukat) #35

Whether pix uses both natural rubber and artificial rubber for belt production? if yes, how much % they uses natural rubber ?.. I am curious to know this as natural rubber prices are at bottom and not expecting a hike in near future…

Is artificial rubber pricess are high now as it is dependant on crude?