Paramount Communication - Belongs to Lucrative Industry

Stock Opportunities
22

Yes equity is generally costlier than debt, but two points

  1. It matters at what valuation is equity raised. Higher the valuation, lower is dilution and hence lower the cost.

  2. Warrants they raised in last 12/18 months at 22rs and 65rs were highly dilutive but still was needed to get out of debt situation.

2 Likes
23

Can someone tracking here highlight What would be triggers here for rerating?

1 Like
24

Due to paying of taxes eps will not grow for 2 more quarters. That is a trigger. Another trigger is some fii is selling. They have small stake left. These are the triggers as per me.

1 Like
25
8 Likes
26

Impressive turnaround story. Only fly in the ointment could be their over dependence on US export, at a time when US is entering into Lalaland of Donald Trump

Its time to be cautious on any company having more than 50% exports to US

Disclosure - Interested but not invested

5 Likes
27

Why is Donald Trump lalaland? He is good for US business/ economy and good for India.

Infact Indian companies having US dependence should do much better in his reign.

1 Like
28

Just one correction here ā€“ In H125, only around 25% of sales were to US. Domestic is also growing very strongly.

29

He is good for US economyā€¦periodā€¦for rest of the world, its a game of chess. Sometimes up and sometimes down. In short term, as he goes after China, Mexico and Europe, Indian exporters may benefit. But he will come back and ask for his pound of flesh from Indian govt/indian businesses and will be unpredictable even after giving in to his whims and fanciesā€¦so his tenure would be full in surprises so not good for any steady long term business growth for non US companies, doing business with US

5 Likes
30

I think this should stock do well over the next 3 years. All of you have covered the important points and here is what i wanted to add.

  1. Currently its the 6th largest cable manufacturer in India. In one of the interviews, MD mentioned that they wants to be the top 3 cable manufacturer by 2030 with a revenue of 10,000 crore.
  2. With US imports and assuming that Trump will levy equal tariffs on all countries and slightly more on China, than Paramount will benefit because it will get level playing field when competing with countries like vietnam who donā€™t pay duties when selling in US. Plus, paramount will get more dollars so more revenue.
  3. The current market cap of the company is around 2500, so a 400 crore QIP would mean that Promoters would need to shell off another 15%-16% stake. So their stake would come down to about 35% and maybe after it they can manage working capital needs for future via financing.
  4. The upcoming greenfield capacity will be at least as big as the current capacity. So letā€™s assume it come in FY 27, so we can safely assume the revenue would be around 3500 crore (Promoter said they can do abt 1800cr with current capacity). So in next 3-4 years the revenue is likely to be around 4K mark.
  5. So letā€™s assume, FY 28 revenue is 4000 crore, 4 times the current level. EBITA at 10% so roughly 400 crore and PAT at 8% of the revenue so roughly 350Cr. We are talking about an EPS of 10. Given the boom in this sector and a PE of around 50, the price comes out to be 500 as per FY 28 eps.

Disclaimer: Invested a huge chunk at 79 level.

3 Likes
31

I wouldnā€™t count on the pe of 50 part. Just because now the transmission and distribution theme is going on the stocks are getting high pe. After 2-3 years this might not be the case.

4 Likes
32

thanks for the calculation. Have you considered the EPS with possibilities of dilution?

33

I will request fellow boarders to be circumspect and not be overly optimistic. In my opinion, expecting a PE of 50 is a bit too much, particularly for a commodity kind of business. Moreover to calculate big projections on pen and paper is easy but to deliver is the tricky part. So it is advisable to be grounded and tone down expectation. In this downturn, I expect that better opportunities will come your way. Rest upto individuals.

4 Likes
34

@Prabhat_Mohanty Fellow boarders are just trying to predict the possible outcomes from the currently available data. I think this is what fundamental investing is all about. The kind of triggers this business has, i also believe that it can reach a bottomline of 300 cores by FY 28.

What valuations and earning multiples it will get is upto the market. If you feel earning multiple of 50 is wrong than you can assign whatever multiples you feel are fare to the earning projections. And you can take investment decision accordingly.

For example personally for me, even a earning multiple of 25 (which i feel is fare) will give a market cap of 7500 in FY 28 on a earning of 300 crores. It means stock provides an opportunity of 300% returns from current price. Somebody whose expectation is 6 times will only be happy if he gets 50 times exit multiples.

So, its all about personal expectations and decisions. If you feel its a commodity and should get only 10 times earning multiples than it will not provide you any upside as per your calculation. You should not invest in that case. So, investing decisions are quite personsal, and this valuepivkr community should only be used to understand a business and probale earning trajectory.

Disclosure: invested.

7 Likes
35

Has the management informed about the capacity that they will be adding in FY27 to achieve 3500cr ?