at the current 14-16 PE levels, can one assume the risks of currency appreciation/vietnam production delays, TPT issues are now priced in ?
The new Vietnam plant should provide 18 - 20 % increase revenue claimed by the company in FY 2018. In the FY 17 AR, the company says that the new Vietnam plant can reach 100 % capacity in the last quarter.
- If that is the case, how can the company keep expanding its revenues say for the next 3 years?
- Does the business always demand capex every now and then to increase revenues since the top line has been flat for a couple of years now and it seems they do not have any pricing power?
What is the risk to Premco Global from unorganised sector ?
No major risk from unorganised as the segment it operate is MNC like Hannes which would look at quality then only price. However, ability to scale up Vietnam operations since last 4-5 quarters and utilise domestic capacity at full has been chellanges due ot which financial of company were mediocare in my opinion,
The consolidated figures for the last quarter(i.e marginal uptick in vietnam sales) look like greenshoots to me.
I would keenly watch whether it continues it’s uptick from here . If yes, then the long wait for the production rampup might be kickstarting perhaps…
Yes, the annual report does give confidence that sooner or later the company should get the benefit of utilization of capacity in Vietnam which has been a drag for last 1 year. The capacity at Vietnam is sufficient to double the revenues of the company without any material capex. I feel once they get success on this…they may be able to embark further expansions. However, its critical to see how soon they can get going on utilization of the capacity they created at Vietnam and its also important to understand the reasons why they failed to see any revenue for so long.
Countries other than US,Canada are trying to cobble up an arrangement of their own.
Will there be any positives for premco here?
Would love to hear from the market veterans on this thread about the recent results and the market reaction towards the same.
Does Premco hosts conference calls ? I could not find any reference. I could not find any notification in BSE site. If no, how we can understand the reasons for subdued results and management commentary on future growth prospects ? Is there any other way to gather information.
Especially I am looking to see if lack of growth in profit/sales in this quarter can be considered as opportunity to increase positions or to reduce/exit to save the capital.
I thought I will try calling. Then I noticed no investor relations contact mentioned in the website.
Tel: 91-22-28223232 listed in contact us is an invalid number of date and I did not try common email id [email protected] as it is very unlikely to land to any one who can handle investor relations.
I also tried to reach the company secretary, Harshakaur Hotsinghani at 6105 5000 and could not reach to any operator. Now I dropped an email to harshakaur -at- premcoglobal -dot- com asking if they expect the subdued results to pickup or not and about Vietnam production. Will post if I get any reply from CS.
Looking for comments from seniors who invested in this counter.
Results are bad. While i can understand that domestic textile market may have adversely affected by GST, but still can not understand why exports are not picking up? Indian operations performance is not at all meeting expectation in my opinion. Closely monitoring development in this investment.
Discl: Continue to hold my investment but cautiously watching development on counter. Investors shall do its own due diligence before taking any action. My view may be biased due to my holding.
Poor results…there were indications in the annual report that production from Vietnam plant should pick up…however, that isn’t reflecting till now. Need to understand what has been the problem.
Agree with comments from Dhiraj.
Ayush, What I like in your strategy is you sold a major part the holding a year and half back. It was such unbelievable timing. Capital is not locked up and freed at the most opportune time. How did you do that. Did you anticipate before this kind of performance for last 3 qtrs or routinely sell small caps after making certain multiple of your investment or to bring down a large position to balance portfolio. Because I feel your buy call was great but your sell call is even better, not many investors can emulate accuracy during both buy and sell let alone on one side. I believe you made a 10 bagger on this one without any noise
Does premco host a conference call or investor meet? How can we get in touch with the promoters to find out the reason for such bad results. I understand that every company goes through several ups and downs and good companies do bounce back. Unfortunately, there is little to no information about this information anywhere in the internet - A google search of premco returns the VP thread in the first page!
After Q2 results, i had asked a few questions to the company’s investor relations team. Here is the response from them:
"Company’s share in domestic Market is same as last year, There is no change in the market share. However, due to GST implementation, the Domestic Customers, kept wait and watch situation in first two months. Also it was mandated that they will liquidate the PRE GST stocks before placing new orders. This resulted in lower sales. This has since been absorbed and now the sales are again in line with our expectations.
The decline in sales is attributed to export sales decline, due to partly being supplied from Vietnam and also due to lower demand in overseas markets. This will be compensated by growth in Vietnam sales (PGVL) in Q3 and q4.
Company’s Vietnam operations are on the right track and the unit has declared a marginal profit in first six months as compared to loss Last year.
While efforts are being placed to ensure improvement in Q3, Hopefully Q3 and Q4 will be a recovery path,"
And they don’t seem to have added new clients in Vietnam. As of now, this Vietnam plant is at Hanes’ mercy.
Quoting from the FY17 Ar -
- Let’s assume that for a 15 % increase in Conslidated PAT the company has to achieve ~ 9.5 Cr.
- All other factors kept relatively same, this would translate to an operating profit of ~ 21 Cr.
- At a 17.5 % OPM, this would mean that the company has to achieve a top line of 119 Cr which is a 60 % increase YoY
With 2 quarters remaining, and OPM at a 5 year low, the above numbers seem highly unlikely.
Request your valuable thoughts on the same.
Disc : Invested recently.
@ayushmit I would also like to get answer of what @srinii_mm Srinivasan asked ,
How do you manage selling in these small cap and micro cap at opportune time ??
Any specific or general guidance you can share ??
A request - I’ll like to use VP platform to discuss about the underlying co rather than my trades.
In this case, I don’t think we sold the shares (barring some small qty as partial profit booking). I think it was wrongly reported in the annual report (may be because we transferred some shares to another DP).
So contrary to the illusion of being smart, I have remained invested in this one
Hi Ayush, Have a basic question about companies building assets in other countries with capital controls. In this case, Premco has built a plant in Vietnam and assuming it generates profits eventually, will Vietnam government allow the company to repatriate the profits to India so Premco is able to pay dividends to it’s Indian investors or invest that profit elsewhere?
My observation is except developed countries, other countries (including India) have some or the other kind of restrictions on repatriation of capital back to the country of origin. There are some rules and exceptions to this policy and profits but not the capital may be allowed to leave the country. I am not familier with the capital controls (or lack thereof) in Vietnam so wanted to get your view on the same. Generally such profits have to be compulsorily reinvested in the foreign country. If that is the case in Vietnam, Indian investors may never be able to benefit from growth in Vietnam business as company may not be able to repatriate the profits out of the country (to pay dividends or to invest elsewhere).