My understanding is the company into multiple verticals and a slowdown in any vertical is causing them a trouble, previously it was auto and solar for a while & now it is railways. The wayforward is if their plan to reduce WC cycle from 100 to 75 days and a significant scale up in anyone vertical like if their enviro business scales upto 50% the size of ION exchange or railways and auto components to 30-40% scale tube investments can take up the profitability higher or their PEBS vertical working out well in USA. Now they are deploying more capital into PEBS USA and it has a shorter cash conversion cycle too because they don’t do execution of projects. But looking at mkt cap it is very cheap because seems like things are changing positively and has high operating leverage so I wont be surprised to see their profits change substantially may be to 100 cr within a year is possible. If change in WC cycle also happens we can see significant rerating too as a diverse engineering company
Looking forward to the performance in this financial year of their step down subsidiary Ascent Buildings in which they have invested $4.9 million. They have mentioned minimum 4x asset turnover and an existing order book of 4 million in this unit. Though currently projected to be a smaller revenue stream, if this scales up over the years, it will be a substantial boost to the bottom-line given that US business operated at higher margins.
One more thing to watch is the interest cost to sales which has been more than 5% in the last two quarters. As they improve the WC cycle and scale up the revenues, this is also expected to fall down to 3% by Q4 FY22.
On the land sale at Patancheru, they have concluded an agreement with an interested party and the transaction will be completed once the bank issues the NOC. So this is imminent and will then i think add the capital gains to the P&L
In the interim, they have guided for Q4FY21 profitability to be higher than Q3 and that should commence the turnaround for the company. Though they are likely to report a loss for the year due to the crushing Q1 results, they will register a series of increasing profits QoQ since then. In Q4 they are seeking to achieve close to their pre pandemic level PAT and my guess is that they will get to PAT around or even above 15cr (EPS ~ Rs 1) which can then jumpstart the rerating given that this is really an undervalued opportunity at this point.
Discl: Invested recently
Correction to my earlier post after rechecking con call details - expected PAT was mentioned as along the lines of Q3FY20 results which was around 12cr (EPS ~ 0.8). I am sorry for this error.
Board meeting on audited results
Q4 FY21. EPS = 2.35 but this includes one time land sale gain of 20cr.
Net Profit of Rs 33.5 cr against Rs 0.96 cr profit last year Revenue up 35 % to Rs 557 cr.
Company posted negative OCF for the year considering lockdown impact.
Q4 recovery in the terms of revenue and PBT was in line.
Management is making quite a hefty investment in US subsidiary ascent buildings in total of 9.2M USD. Looking to see how this pans out in the next few quarters.
Disc: been holding since October 2017. Averaged and doubled holding between March 2020 - July 2020.
worst corporate governance
please look into this webpage
What is the reason to sell for 62 lakh consideration for a company that does great work ?
Anyone else on this forum . Is this a lapse of corporate governance ,?
In FY2020 - Feb 2020, Pennar Industries bought One works BIM Technologies, which specialises in Building Information Modelling Management, Data Collection, and 3D digital Building Information modelling. The Company aims to market and sell this service into new advanced markets of Europe and UK.
Any idea why Pennar is buying back shares in such small lots?
because they are low on funds, and the buyback is more of a sugar coating
Thanks for the reply. I believe that answers " why are they buying back"
I’m more concerned about "why are they buying back in such small quantities on a daily basis.
Moreover, they made an announcement to buyback at Rs50/share. Apparently, they are buying back at around Rs40/share
50 is the top range if it goes above that they won’t do the buyback, if it is below that they will do it. Those are the terms of buyback. On the quantum of buyback it must be some cashflow problem or 50cr buyback is not the intent. Because it is too rich for the size of the company
Company is presently sitting on 130cr of cash. I don’t think they will have any difficulty in executing the entire buyback .
Buying back at lower prices is more beneficial for promoters and existing shareholders . More shares more equity gets reduced .
Earnings seem to be on a massive uptrend this year.
Market is pricing in quite a substantial recovery. Ascent buildings + Indian PEB should fire this year .
Engineering components business as mentioned in AR will do very well this year.
Ascent will struggle if US goes into a recession. Commodity prices has to soften further for the Indian Business to improve margins. Currently, they have abysmal margins (They get grilled on it in every concall. Management admits the margins aren’t good).
Railways business has competition & the margins have gone down drastically. So, not sure how much they can benefit from the ongoing uptick in Railway capex.
Maket Seems to be recognising the company lately .
Quarter gone by reported a massive rise in revenue .
Momentum I think should remain with respect to sales growth and profitability .
Very strong guidance given by management .
Major beneficiary of capex revival.
FY2024 EPS should be close to 8 (can be higher if rationalization of fixed costs & operating leverage kicks in)
Ascent buildings USA big growth driver.
Disc: invested
Market and investors seems to have noticed the earnings trajectory .
Product mix has changed significantly over the last decade with majority revenues coming from engineering industries especially pre engineered buildings and automotive.
Case seems ripe for EPS expansion + PE expansion.
Disc : invested
