Pix Transmission - low profile smallcap company

Now, complementing this with physical scuttlebutt…

Our business, like most industries, uses V belts. We use Pix and Fenner. This is what a V belt looks like:

It is quite hard, not stretching at all. Can see that cracks form in the V belt, at which point it has to be replaced.

Disc- no holdings as of now, tracking closely

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you mean to say, no need to buy complete belt, just repair the patches will work, replacement is not that frequent as it appeared,

No. These don’t get repaired. Have to be replaced.

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honestly my experience with Pix is the same…

our factory had always been using JK fenner…(earstwhile FENNER) …they were much more durable and had much longer life…

pix is more easily available at industrial goods shops…but quality can never match fenner…(although that actually works good for their business ) :joy:

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Same here ,our company also tested pix for trial its quality not up to mark for a continious plant like petrochemical or oil and gas company , so here weused continental

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Pix has released its annual report yesterday - https://www.bseindia.com/xml-data/corpfiling/AttachLive/cfde1596-ca79-49ab-a8de-ad7550b4ac2d.pdf

Nothing much to see, very dry report. A couple of things that caught my eye:

  1. Export sales have grown by 29% yoy while domestic sales have only grown by 5%. So India capex story is yet to play out. Will this be an additional lever for growth this year?

  1. Pix freight costs increased by a whopping 80% y-o-y. Had freight costs remained the same % of revenue as last FY, PIX EBITDA would have been 100bps higher. So, out of the 500 bps EBITDA de-growth YOY, 100bps can be chalked up to freight and most of the rest is due to gross margin compression.

  1. They had taken a 42Cr floating interest rate USD secured loan this FY which has been swapped to a EUR fixed interest rate loan with low interest rates ranging between 1.4-2% p.a. INR depreciation will increase debt service burden but there will also be some compensation via increased INR revenues. All these loans are secured loans disbursed against claim on company assets.
    Unsecured loans to the tune of ~23Cr are serviceable by March 2024 at annual interest rates of 9-11.5% (Last year interest costs were 10.5-13% - Reflecting benefits of credit rating upgrade from A- to A)

  1. Out of the total capex of ~ INR 70Cr, 23Cr each went to factory premises and plant and machinery with a capital advance of ~17Cr. I am assuming the factory premises part is related to logistics hub whereas P&M is related to production equipment?

They have announced their AGM date on 20th July. @RajeevJ Rajeev Sir, Are you planning to attend this year? If so, will be eagerly looking forward to your notes from the event. If anybody else is attending, please share your notes here :slight_smile: It will be interesting to get the Management’s view on domestic capex cycle and what kind of order inflows they are seeing…

PS: Not a peep in the report about the revamped website. A bit strange considering its a well made website.

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Few additional points:

  • Chairman’s letter states: "However, the complexities that arose due to the Covid-19 pandemic have only been further exacerbated owing to the current geo-political tensions as well as the slowdown being witnessed across major geographies. Whilst we continue to review measures that can be adopted to safeguard our operations, *we believe that several challenges will persist through the course of the coming year and we will need to show further resolve to overcome them*". I am hopeful that members joining AGM will probe further and share their notes around this topic.

  • No of Share Holders – 23894 [was 12751 in FY21]. I am yet to join this club !!!

  • Present value of obligation as at the end of year ~11 Cr. Recognized in the B/S as Non- current Liabilities mainly. Someday it must flow to the PnL and will suppress earnings.

  • Term Loan repayment ranges from 33 months to 54 months

  • An accounting change (Seems to be a reasonable step): Note 46 - "Till previous year, the Company presented sales related discounts under other expenses instead of adjusting the same against the revenue from operations. In the current year, the Company has restated in accordance with Ind AS 8 - “Accounting policies, Changes in accounting estimates and Errors”, restating its numbers for the preceding year ended on 31 March 2021 in this regard. The information below summarises the impact of the restatement: Revenue from Operations as reported for the year ended 31 March 2021 with Rs. 37,323.34 lakhs; restated amount being Rs. 35,394.17 lakhs. Other expenses as reported for the year ended 31 March 2021 with Rs. 6,092.91 lakhs; restated amount being Rs. 4,158.58 lakhs. Other line items of Balance Sheet and Statement of Profit and Loss that were not affected by the restatement have not been disclosed. Furthermore, there is no impact on the profit and retained earnings of the Company for the said year. Accordingly, opening balance sheet has not been presented.

  • Foreign currency risk: The Company has not taken any forward contract during the current year and also there were no outstanding forward contract as on 31 March, 2022.My inference from the below image - Managing the Foreign currency risk in the current FY using ‘Foreign currency term loan’ , ‘Cash’ and trade receivables

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Thanks a ton @nirvana_laha for your detailed & insightful post after taking pains of going through the Annual report in some depth.

It is clear that the volume shift towards exports is already happening with 60% of Sales coming from Exports in 21-22. This is only likely to gain momentum in the current year. Pix is a small player in the international market & there is plenty of room to grow there, leaving a long runway ahead for a number of years to come. I expect the increased capacity that will become fully operational only towards the end of the September qtr, to get used up in the next 18-24 months!

The Domestic market has its own challenges with every price increase being met with some or more resistance. Pix which is the market leader in the non OEM segment, has painstakingly helped build this market, so will perhaps never desert it, but if the demand is coming from the international market, then clearly that is where the focus will shift going forward.

The operating margins are set to revert to earlier levels gradually with freight charges already cooling off meaningfully. Meanwhile, the Co. increasing prices gradually is an on going process. Pix should start seeing exciting times over the next 6-8 quarters starting with the second half of the current year. It has already demonstrated its ability to scale up operations & I don’t see any execution risk here. Also, this scaling up has been carried out, both with alacrity as well as with financial prudence. The logistic hub is state of the art & the Co. should have talked more about it in the Annual report, but it is always extremely restrained when it comes to the AR.

The one criticism that the share holders can justifiably have against the Co. is that it continues to hold physical AGM’s in this day & age, that too outside Nagpur city at 9.30 am! With Pix taking a series of initiatives to get the attention of the investing community, hopefully this too would be addressed sooner than later!

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