Parekh Aluminex is a company which manufactures aluminium foil containers and aluminium rolls mainly used in various industries esp packaging foods etc.
ttm figures for company
sales 1766 crores
net profits 106 crores.
debt as on march 12 was around 415 crores. (It must have increased looking at higher payment of interest to the tune of 53 cr for half year ended sep 12 as compared to 30 cr for half year ended sep 11 and 71 cr for full yr fy 12.
cmp 183, market cap 262 crores.
Now coming to the special situation, the promoter and ceo mr amitabh parekh has expired last week and since the news the stock has crashed from 293 on 4th jan 2013 to cmp of around 182.
Coming to possible reasons could be high promoter pledging and the pledge being liquidated by the institutions to whom shares were pledged.
Another reason could be sentimental due to demise of the MD.
Currently there seems to be massive selling with downcircuits but I guess at some stage when price stabilises this could be a good opportunity to buy into a good company with a simple business.
Similar knee jerk reaction but of a smaller magnitude occured in cera stock price when there was demise of vidush somany after which we know what happened to stock price.
Trick remains not to be in a hurry to buy this one.
this has always been on my watchlist. this was one of the first stocks i invested around dec-11 and made a good exit with 100% returns. If one looks at the long-term charts, the stock rallied from mar-09 to nov-10 in clear five impulse waves and then corrected to 170 which was 76.4% retracement of the entire rally. rally since then has been anemic and seems like it was a B corrective wave to 380-390. now what we have seems like the final C corrective wave where the first support lies at the A wave bottom in the 160-65 region. i think once the stock stabilises, this could be a good trading oppurtunity for quick 100% returns.
How old was Amitabh PArekh and who is the successor in this absence? If he were too young, his children would not take over. Like Father took over management again in Cera, what about parekh?
I think this deepen arun parekh may be brother of amitabh parekh.
amitabh parekh was very aggressive in ramping up the business scale of parekh aluminex. but he was a very flashy guy. Problem with his approach was that he has accumulated a lot of debt for parekh aluminex. they paid close to 53 crores in six months ended sep 13. and statement of accounts is missing in q2 fy 13 results so no idea about exact amount of debt.
Next question would be who would take over the company? whether from family or outside? Some gulf based funds like tawoos etc are invested since a long time. Whether they might have a say or not needs to be seen.
An all time low of Rs. 45.15 was recorded for Parekh Aluminex in Jan 2009. the EPS in Mar 2008 & Mar 2009 were Rs. 20.18 & Rs. 29.47 respectively and book values were Rs. 176.98 and Rs. 205.18. Considering this the company was getting a backward looking PE of 2.23 & forward P/E of 1.53. and P/B of 0.255 and 0.22 respectively. The current PE & PB values are 2.01 & 0.48. This means “Hitesh bhai is correct as always” before hurrying to buy this one - we might have to wait till price corrects (may be in the range of Rs. 76 to Rs. 125) - In my opinion - Rs. 100-110 would be a safe price to enter into this one. Disclaimer - 1] Mr. Market may not even give us this opportunity. 2] sorry for very crude calculations. senior boarders may be able to give appropriate calculations here. 3] I hold this scrip at Rs. 322 and i am keen to re-enter 4] This scrip has been in controversies - so not advised for novice boarders
My layman reading: We have to understand what is the risk and what are the damages due to those risks. Whilst the business is fantastic, the stock never got the recognition because of promotersâ âanticsâ. It has always been hovering around 6-8 times PE except at the time Amey mentions and before that when it had crossed 600 in all the euphoria. Business is expanding, clients are there, product is genuine. What has been in doubt is the quality of the financials (whether they are genuine). But at this juncture, this is not a balance sheet case. Being a manufacturing concern, if the officials of the company are able to keep the plants running and producing the foils, their ready set of clients would keep buying since this is a consumable product. Where promoter would have added value is (1) expansion of manufacturing facilities and (2) marketing efforts â new clients, new geographies etc. So if the promoter is absent, it is highly unlikely that the company will shut down. H1 sales are at 1000 cr with EPS of 44 compared to FY12 sales of 1400 cr and EPS of 65. Assuming H2 is dismal and company only manages to match FY12 performance (which means H2 is half of H1), still PE ratio at 170 is 2.6. I feel the current price more than captures the damages due to the risk of loss of promoter. If we can gauge that yes, there is someone who can come on board from promotersâ side just to maintain the operations, the stock will see a rebound. More so, if the current selling is aided by margin selling as is mentioned earlier. Extreme case â plant shuts down, and company goes into losses. Probability of this â 10% maybe? I cant assign a value, though I would guess it is quite low. Probability of the above happening â quite high since it is a realistic scenario. So â question is, when do we buy? It is in lower circuit for 3-4 days. Who knows, from tomorrow it will be upper circuit ! Though again I feel probability of that happening is low (upper circuit immediately the next day till which it was LC). I feel it should open up a bit. That would be time to add, perhaps 50%. Who knows, it might be LC again. And then wait it out.
I have tracked this co earlier too and somehow this co has never given comfort and would advice caution.
If one looks at the business model, its quite a competitive and commodity business and here the co is quite leveraged. In such cases, its quite tough to make out the balance sheet.
If I recall right, In earlier times, a operator - Nirmal Kotecha used to be quite and was also part of management. There were lots of SEBI orders etc against him. So because of this, I think one should be careful.
Regards,
Ayush
PS: Many often if the market is valuing a decent sized co at abnormally low valuations in normal market times, then usually market is right.
Parekh Aluminex Ltd has informed BSE that the Board of Directors of the Company has appointed Mr. Dhaval Mahesh Parikh as Managing Director of the Company for a period of five (5) year with effect from January 04, 2013, subject to the approval of the shareholders of the Company.
With reference to earlier announcement dated January 14, 2013 regarding appointment of Mr. Dhaval Mahesh Parikh as Managing Director of the Company for a period of five (5) year with effect from January 04, 2013, Parekh Aluminex Ltd has now informed BSE that this announcement was inadvertently made by the Company, Mr. Dhaval Mahesh Parikh is not appointed as director of the Company.
his appointment must have started an internal tussle - these announcements dont happen by mistake, the DII/FIIs must have cried foul here … the independent directors now go to step in
