CMP: 882
Total revenue from operations 2,113 Cr
2,241 Cr (-5.71%) YoY | 976.5 Cr (116.42%) QoQ
Six months ended revenue: 3,090 Cr Vs. 4,193 Cr (-26.32%)
Net Profit of 221.5 Cr
193.7 Cr (14.51%) YoY 117.5 Cr (88.83%) QoQ
Six months ended Net profit: 339.1 Cr Vs. 329 Cr (3.01%)
EPS (in Rs.) 14.75
12.90 YoY | 7.87 QoQ
Six months ending EPS: 22.62 Vs. 22.02
View: Result is overall good. YoY revenue declined marginally but profit up and margin also improved in this quarter.
Business Updates & Highlights
EBITDA in Q2FY21 was around INR 312 Cr Vs. 270 Cr Vs. 56 Cr in Q1FY21 therefore up by 15.5% in YoY and up by 457% in QoQ. EBITDA margin in Q2FY21 was around 14.8% Vs. 12.1% therefore improved in YoY with good margin.
Material cost also significantly improved in this quarter (Q2FY21) and it was around INR 1512 Cr on the revenue of INR 2,113 Cr and it was around 71.5%. Material cost for Q2FY20 was around INR 1645 Cr on the revenue of INR 2,241 Cr and it was around 73.4%. Therefore it was improved by 200 bps in YoY.
Company is primarily operating into two main segment Wires & Cables which cover topline around 80% and FMEG – 10.8%.
Wires and cables business declined 7% YoY to Rs. 1,741 Cr in Q2FY21 from Rs. 1,881 Cr in Q2FY20. The business saw improving momentum with resumption of economic activities. B2C wires and exports sustained the strong traction. Wires & Cables business bottom line in Q2FY21 was around INR 254.1 Cr Vs. 201.1 Cr in Q2FY20 and it was up by 26.3% in YoY.
FMEG business grew 25% YoY to Rs. 244 Cr in Q2FY21 from Rs. 195 Cr in Q2FY20. Growth was resilient across most categories and regions. FMEG bottom line in Q2FY21 was around INR 19.6 Cr Vs. 6.5 Cr in Q2FY20 therefore also up by 201.5% in YoY.
Financial
ROE and ROCE is around 22.6% and 29.3% respectively and book value per share is around INR 257 and share is currently trading at 3.4x of its book value. Company is currently trading at annualized PE of around 20 which is average as per industry benchmark. Promoter holding is around 68.5% in the company which is very strong and stable. FIIs, Mutual fund hold and IFC hold around 6.1, 13.1% and 9.5% in the company. Cash and cash equivalent from operating activities as of Sep 2020 Vs. around INR 774 Cr Vs. 238.5 Cr as of Sep 2019 Vs. 245 Cr in March 2020 (**Very strong**). Debt equity ratio is 0.04X as of Sep 2020 Vs. 0.10x of March 2020 (stable & positive).
Share View: Share price high 1,182 (52 week) and now 882. PIL is a leading Electricals brand with over Rs 88 billion revenue. PIL is the largest manufacturer of Wires and Cables in India and a fast-growing player in the FMEG space. PIL manufactures and sells various types of cables, wires, electric fans, LED lighting and luminaires, switches and switchgears, solar products, pumps and conduits and accessories.
Position: Share strong support price is INR 750. Mid / Long-term investor should continue with the company and any correction will give the opportunity to add and long-term target can be 1,250/1500.
Opportunities: The organized home wires and cables industry in India has a market size of around Rs 54,000 crore, of which PIL is the market leader with approximately 15% market share. PIL's market position is facilitated from its strong distribution network with 6 warehouses and a dealer-distributor network of over 5,000 entities. PIL has significant market share in West and South India, which contributes around 70% to its revenue share. Strong client base includes Reliance, JSW, Asian paints, Siemens Nifty 50 companies clientele. Indian Electrical Equipment Industry plans to make India the “country of choice” for production of electrical equipment. Government announced expenditure of INR 111 lakh crore in infrastructure sector over next 5 years, as a part of National Infrastructure Pipeline (NIP). Increase in Consumer Spending, Infrastructure Growth and Industrial Investments to Drive Electricals Industry. Strong operating cash flow which was more than double in this quarter as compare
to March 2020. Due to healthy financial profile company has sufficient accruals and cash and cash equivalents to meet its capex and long term debt requirements.
Risk: The house wires and electrical cables segment is highly fragmented with a large number of unorganised players constraining the pricing power of organised sector players. Apart from unorganised sector, PIL also faces competition from organised sector players such as Havells India Ltd, Finolex Cables Ltd, and KEI Industries Ltd. Due to cost cutting measure and operation efficiency company has been able to manage their bottom line but topline corrected and also increasing topline with more than double digit with this competition will be challengeable in future. Electrical cables and wire contributed more than 80% of PIL business and any slow down in Real estate, power and slowing economic environment can impact the performance of the company since company mainly dependent on this segment.
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