Pulz Electronics - proxy to the Indian entertainment sector

[NNaik]

I found this stock while looking for Micro-Caps (< 50 crore market cap) which show good returns and growth with zero debt. It is currently trading below its recent IPO price of Rs 56 (Current Price - 38, Market Cap 10.36 Cr.)

Company is in the business of manufacture and installation of high end speaker systems in multiplexes and studios in corporate setup. It supplies to likes of PVR, Cinemax, UFO and INOX as well as corporates like Reliance, Hindujas as well as Government to Army, Navy, Airports etc. It installs the audio systems on project basis and also undertakes AMCs which forms a small portion of its current revenue.

They have a plant near Mumbai and also a warehouse. They import from OEMs in Europe. I am still trying to understand the value addition that Pulz does as well as what is the competition to the company. This will be key to understand the sustainability of the growth.

The growth numbers are strong with 3 year Sales CAGR of 23% with around 10% NPM. Key numbers

	Mar-13	Mar-14	Mar-15	Mar-16	Mar-17	Mar-18	Mar-19
Sales	5.28	9.21	11.77	12.98	13.76	18.04	24.00
Operating Profit	0.39	0.48	0.46	0.67	2.21	2.33	3.40
Net profit	0.21	0.10	0.01	0.30	1.34	1.62	2.46
EPS	4.20	2.00	0.20	6.00	6.70	5.94	9.02
Price to earning						6.49	4.42
Price	-	-	-	-	-	38.57	39.87
RATIOS:
Dividend Payout	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	5.69%
OPM	7.39%	5.21%	3.91%	5.16%	16.06%	12.92%	14.17%

IT has paid dividend for the first time this year.

While the Returns are good Inventory has been building up which is sometimes seen in growing business but is a definite watchout as it has been increasing.

PULZ ELECTRONICS LTD	Mar-13	Mar-14	Mar-15	Mar-16	Mar-17	Mar-18	Mar-19
Sales	5.28	9.21	11.77	12.98	13.76	18.04	24.00
Debtors	0.30	0.35	0.69	1.01	3.11	1.07	1.26
Inventory	2.78	4.61	4.54	3.80	4.46	7.25	10.56
Debtor Days	20.74	13.87	21.40	28.40	82.50	21.65	19.16
Inventory Turnover	1.90	2.00	2.59	3.42	3.09	2.49	2.27
Number of days of Inventory	192	183	141	107	118	147	161
Return on Equity	11%	5%	0%	12%	35%	18%	21%
Return on Capital Emp		11%	10%	14%	48%	32%	34%

Management Quality

Overall information about this group is little hard to come by and the promoters seem to be well qualified for the industry

Mr. Ramakrishnan Krishnaraju Manden Kattilaged 69 years, is the Promoter and Executive Director of our Company.He holds graduation in Science. His Key Competencies includes designing amplifiers, speaker system, Acoustical measurements and calibration for cinemas, auditoriums and studios. He plays a vital role in the management of the Company.

Mr.Anirvan Partha Ghose aged 43 years is the Promoter and Managing Director of the Company. He has done his graduation in Bachelor of Science from St. Xavier’s College, Kolkata and also completed a course in Computer Hardware from Institute of Electronics and Hardware Technology, Kolkata in 1994. He has done specialized audio video training from Dolby Laboratories, Sim2, Sound Engineering and Sound recording Course from Film & Television Institute of Pune in 1997. His Key Competencies includes designing Auditoriums, Cinemas and Recording Studios, Designing and Manufacturing of Audio Equipment, Installation, Calibration and Maintenance of Audio and Projection Equipment in Cinemas He is member of SMPTE, IFFI Technical Committee and NFDC Technical Committee.

Management compensation at 57 Lakh (23% of Net Profit) is on higher side and is another watchout for coming years

Valuation at current levels seem very attractive at PE of 4.2 and should provide good margin of safety.

Overall seems like a good business to be in as companies like PVR have been growing in investing in new multiplexes especially in smaller towns. There should be a good runway for growth in medium term as mix of single screen vs. multiplexes continues to change.

Still researching the company and few things I want to understand are -

1. How much of value addition is Pulz doing?
2. Understand the competition and power that suppliers have in Multiplex infrastructure
3. Understand the audio technology and find out what kind of OEMs are supplying to Pulz and is there any edge due to these relationships.
4. Understand the management track record more as this is a recent IPO and there is not much of historical data
5. Understand the nuances of investing in a microcap space and even a small investment will be illiquid with Just 10 Crore market cap of which promoters hold 70% +

Disc: Interested but not yet invested.

[yourraj]

Pulz has issued entire equity at par and has also issued bonus shares in the ratio of 1 for 1 in March 2011 and 3 for 1 in March 2017. Post issue, company’s current paid up equity capital of Rs. 2.00 crore. will stand enhanced to Rs. 2.73 crore

one can check : https://www.zaubacorp.com/company/PULZ-ELECTRONICS-LIMITED/L32109WB2005PLC104357
https://www.zaubacorp.com/director/RAMAKRISHNAN-KRISHNARAJU-MANDEN-KATTIL/00194891
https://www.zaubacorp.com/company/R-AND-S-INDIA-ELECTRONICS-PRIVATELIMITED/U29299MH2000PTC128688

corporate office is promotors and given lease to company ( THIS is not digestible )
Promotors income tax cases are pending from long Page 26 of prospectus

if one is interested one can go through the Red Herring Prospectus

PEL_RHP.pdf

disc : not invested

[arunkd]

corporate office is promotors and given lease to company ( THIS is not digestible )

can u mention where that information is found in

thanks in advance

[yourraj]

please read Red hearing prospectus attached in the above post

[Raghav_Malhotra]

Is anyone still tracking the company?

The business looks interesting, however not much information is available, so difficult to understand the business and management.
The website listed on screener (https://www.pulz.co.in/) looks good for a 5-6 Cr market-cap company, but it is lacking ‘Investor Relations’ information (very weird). Found the section on a different website (Pulz Electronics Ltd)

If any senior investor has some insights, please do share.

Disc:- Not invested (interested)

[blue]

Hi,

New to investing, but I have found this interesting as well. Information is really hard to come by though. There is this one youtube interview of the MD here -

SME Interview Pulz Electronics Ltd.

Also I have this gut feeling (could not verify) that the MD may be related to the scientist Partha Ghose - Wikipedia.

If yes, the technical underpinnings of the firm should be good. Additionally, as per the MDs conversation, their customer attrition rate is zero.

Main headwind in this current corona period is that all their end customers - theatres, pubs, etc will be facing difficulties for a while.

Would really appreciate some senior investor looking at this.

Disc: Not Invested but interested.

Edit: tagging a few seniors - @hitesh2710 @Tar @sahil_vi @Malkd @Donald

[Malkd]

@blue While I’m not shy regards investing in companies under 500 crores and sometimes even 100 crores mcap… this company seems too much of a stretch even after just a furtive glance.

1. It’s too illiquid with volumes even at 0 on certain days. Doesn’t allow for a substantial amount to be bought to make it worth owning and can be the stuff of nightmares when trying to get out
2. How does one build conviction when the company doesn’t have any sort of investor relations? I only invest in companies under 500 crore that also conduct concalls… it’s rare but the companies that do it are gems since how else can one build conviction in this space without talking to management. If pulz falls another 30 percent over the next year would you have the conviction to buy more(would the illiquidity even allow you to do so?)
3. The office being leased out for the company and the income tax issues mentioned above make this an even worse case to invest in. I’ve not even gone through the rest of the red herring prospectus
4. With covid waging war across the entertainment industry there could be bargains in pvr/Inox thrown at us over the next few months if you want to invest in this sector. The next year will be about survival for this industry… And won’t be about expansion. So doubt there’ll be a need for the ancillaries like pulz in this sector for some time since the focus for the likes of pvr will be survival and not opening new theaters and hence companies like pulz will be in even more dire straits.
   Again, I haven’t even looked at the company in detail
   So take these views with a pinch of salt. Someone tracking this company may be able to give better answers. Disc: Not a sebi advisor either.

[NNaik]

I was interested in this but decided to stay away from such micromicrocaps as liquidity is just too low. Monthly trading value is Rs. 4-5 lakhs. Any meaningfully large sum invested in this company would be almost like a VC investment as you would not find an exit easily unless company really does spectacularly and find some big investors.

Another issue seems to be frequent equity dilution.

[Raghav_Malhotra]

Hello

Your gut feeling about the relation between Partha Ghose and MD was correct. According to me, Anirvan Partha Ghose (MD) is the son of renowned scientist Partha Ghose (scientist).

Apart from similar facial features, I found the following 2 points which support our assumption:

Hopefully, this relationship plays well out for the company. Let’s see how the company performs in upcoming quarters…

[kalidasa]

I have been following this company since IPO.

• The company seems to have been doing well before the pandemic with YoY growing revenue and profit. The company has an assembly plant near Mumbai. It imports a few audio components from Europe. A substantial part of the revenue came from exports to East Asian countries, but most came from the Indian market.
• The company shifted its office many months back—the issue of promoter’s lease of giving lease to the company is no longer valid. Furthermore, the said IT cases are for small amounts of a few lakhs and therefore not of much concern.
• The company is debt-free and available for around 3-4 PE, if one considers the earnings of a normal year. Current market cap is around Rs 5 cr.
• Last year, the company wrote there will not be any medium or long-term business impact of the pandemic, although the business will be severely hit in the near term. Investors would have expected management commentary on a possible change in direction, but no such commentary came.

Disc: Not invested but interested. Bought and sold before 2020.

[kalidasa]

There have been little to no updates from the company in the last 1-2 years. Their websites also has not changed at all. I wonder what they are doing and how the business environment is. The stock price is near life-time high but how are their prospects? Is the company scaling up or are they targeting to remain small for a very long time?

Disclosure: Invested

[kalidasa]

Pulz posted good results. PAT of around Rs 1 crore for H2 FY22 was at the pre-Covid level. The subsidiary R&S has started contributing to the bottomline. The company is net debt-free. Nothing to complain other than lack of information about strategy and future plans.

[blue]

Disc : Been watching this for 2.5 years. Finally took starter position. May increase if numbers continue. Do note that this could still very well end up a boom or bust investment. but here goes.

Pros -

Current Numbers -

Sales and profits -

Scuttlebutt -

Now that is a solid advertisement, if true. No way to verify unless you trust the twitter account.

Charts -

Additional Info -
Firm is actually two firms. Hard to find both links.

R&S | Home - does customized audio installations. viz. Esha foundation, multiplexes etc.

https://www.pulz.co.in/ - High tech acoustics equipment manufacturer.

Co-promoter -
M K Ramakrishnan. - Owns almost 50 %. (and the MD - Anirvan Ghose 25% or so. Anirvan Ghose has been discussed before).

It is very likely that the following link is about the prior avatar of pulz and summarizes the business well. In any case, the best summary I have found. It seems this business has moved on and formed Pulz (including the installation subsidiary). Name, main persons - are all same.

Audio and Video Products Suppliers,Audio/Video Equipments Distributor,Pro...

Annual reports - hidden link.

https://www.pulz.co.in/investor-corporategovernance-annualreport.html

and quarterly reports - again, hidden link

https://www.pulz.biz/investor-financialresults.html

My take here -
Small business with the correct expertise, connections and experience. Successfully backward integrated into manufacturing high end acoustics (this is a feat in itself ). Not really very professional yet - links need finding, no customer relations. Promoters looks reputed and technocrats rather than businessmen. Results are excellent. PVRs is a customer, among others. MD has claimed 0 customer attrition rate. Now Shah Rukh Khan, apparently, also is a customer. Another point - this is a small business (At 90 cr market cap, after a 10x), but has not only survived but recovered smartly after Covid and finally moved well above its IPO 5/6 yrs ago.

Another note - Migration to NSE main board approved. Timeline unknown.

P.s: It would really help if someone well versed with analyzing balance sheets could provide a in-depth analyses of the latest annual report. I can just about read it, so any help would be useful as this is a firm about which very little information can be found.

Attached the AR-2022/23.
SME_AR_23571_PULZ_2022_2023_05092023200956.pdf (5.1 MB)

[kalidasa]

NSE has made it tougher to migrate to the main board. A few companies which did not meet the criteria were allowed to migrate (I don’t think NSE should have allowed them to) but I believe those remaining small market cap companies like Pulz will stay in SME for the next few years.

I am invested in this company primarily because it seems undervalued at less than 15 PE now and much lower PE earlier, no debt and a good growth rate. The company imports high-end audio components from Europe and assembles audio devices in their factory near Mumbai. Their products seem to have great quality. They export to South-East Asia and other countries, but India is their largest market.

One of the company’s key market is multiplexes. Now with several blockbusters in the charts this year, the demand for quality audio should increase. Pulz has an offering named AmpliX in collaboration with PVR Inox.

A few things I don’t like about the company. The company does not share information about the future such as the plan of action, the projected revenue, etc., except for a few lines in the annual report (AR). I have written to them multiple times to make presentation and/or arrange concalls, but they never respond. Personally, I believe any company that does not do concalls/presentation should not be on the main board. They have very low market share in mass markets such as home theaters although they have a few new offerings listed in the latest AR. By their presence in multiplexes, they have been able to build brand value but strong presence in mass markets is important for scaling up.

Disclosure: Invested from lower levels.

[blue]

HY23 - results.

I think the '(rupees in thousands). is a typo. Also, If someone can asses the balance sheet (although I dunno how you can do that with the thousands typo).

FinancialResultsPulzSept2023_04112023194147.pdf (5.3 MB)

Two main points,
i) Good increase in profits and EPS. Not so much in sales.
ii) ‘Rest of the world’ - showing significant growth. Does it come with better margins?

Disc: Invested.

[Mayank_Jham]

I have just recently started following the company and the niche business in which pulz is operating looks like an opportunity.
Here are my personal doubts about pulz before investing:-
1-Microcap (>100cr) and a hihly volatile stock price
2-Less mangement transparency and shareholder communication (only posting Q2 results from last 2 years) and no regular IP or Concalls
3-Is there a resonable amount of TAM that this niche industry has so that PULZ will be able to grow and win over competitor if they arise in future?

Would like to get answers from fellow investors those who are keeping a check on this from a long time and have invested with some thesis pointers in mind