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Monday, February 21, 2011

Company : Pitti Laminations: Dec 2010 Result review

Pitti laminations Dec 2010 results were out on Feb 8,2010. the results are great and Pitti is a value buy.
Is it or is it not? 
Pitti Laminations:
CMP: 38.50.
Market Cap: 36Cr Free Float: 21Cr
Debt March 2010: 75Cr
Reserves: 50Cr
ROCE March 2010: 12.57%
Enterprise Value: 111Cr

If we look at Pitti Laminations based on 9 months earnings: Sales: 174.16Cr, PBDIT: 21.93Cr Net Profit: 5.59Cr. Here are the Dec Quarter results and lets look at them from a different set of eyes

As you can see:
1. March 2010 Pitti had a PBDIT/Sales Profit margin of 15.28% while for the 9 month period ending Dec 2010 PBDIT/Sales Profit margin is 12.59% so compared to last year this year Pitti is actually making less money as margins are down 
This fact can also be confirmed if you compare (A):
On 9 months ending Dec 2010:sales of 174.16Cr  Pitti has a PBDIT of: 21.93Cr
On year end March 2010: Sales of 152.99Cr Pitti has a PBDIT of 23.38Cr
So Pitti made more money last year at a PBDIT level on a lower sales level. 

2. Depreciation as percentage of sales is down from 4.14% for year ending March 2010 to 2.69% for 9 months ending Dec 2010. This is helping Pitti report higher profits.

Conclusion: Pitti is doing as good as last year.. the only difference is the exceptional Expense item of 5.6Cr which had made Pitti report a loss. Actually Pitti's margins have contracted even as its topline is growing... Also looks like the expansion plans have been completed and depreciation levels and interest levels are dropping indicating that going forward we can expect Pitti to mainatain its current margins of 12.59% (PBDIT levels) at the same time report higher profits by keeping depreciation and interest expenses under check.

Stock prices will also react favorably as people look at topline and bottomline completely missing out the margin picture.. Hold on to your stocks as the stock seems to have been accumulated and will move up as it reports +ve numbers each quarter. 
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11 comments:

Kalpesh said...

hey this was given by Ashish Chung even...rite..???

What'sUp Prahalad said...

Kalpesh:

that is correct .. Ashish Chug has also recommended it..

=happy investing
whatsup-indianstockideas.blogspot.com

Kalpesh said...

thnx a lot...soo wht do u think this stock can go upto ...i mean whts the time frame should one see on this and possible trgt..??

What'sUp Prahalad said...

Kalpesh:

Generally stocks will atleast revert to mean .. 2-3 years timeframe..
so within 2 yrs we should see the positive effects for sure...

Now the 2 years could start tomorrow itself cause.. you never know which horse will start winning the race..

we can only predict that the probability of Pitti doing well is high.. and that high can be anytime starting today itself within 2 years for sure..

One needs to have a long term perspective.. the positive development I would look for is dividend payout.. generally in sept as per dividend history..

so look for Rs1 dividend soon..

=happy investing
whatsup-indianstockideas.blogspot.com

bujjanna said...

Hi Prahlad,
Thanks a lot for all your wonderful tips.Debt looks like more than 100 crores, if it continues with the same performance as last quarter, it takes another 10 years to clear the debt.isn't that a drawback of this company

Kalpesh said...

hey Mr Prahalad,

Thanks a lot...for the info ..indeed helpfull....looking forwrd to investing in this as welll...lets c got to hv some fund collection :P

Kalpesh said...

hey...also wantd to know ...from where do u take the financial data..the website...coz the table u have shown is really good made soo...plz if you can tell us..

What'sUp Prahalad said...

Bujjanna:

Pitti has debt of around 79Cr with PBDIT of 25Cr that is 3 years of profits..

Also Pitti has for the last 5 years .. a +ve Operating cash flows which means the promoters seem to be well aware and will not go over the hill..

The expansion is already in place and now we can reap the benefits

Pitti should be paying off its debt.. going forward that is something to watch for for next annual report

=happy investing
hwtausp-indianstockideas.blogspot.com

What'sUp Prahalad said...

Kalpesh:

I create the tables myself..

=happy investing
whatsup-indianstockideas.blogspot.com

Praveen said...

What do you make of the latest result. They did not talk about debt.

In a downturn How much will this company(not stock) get affected. From Ashish Chug article, He makes it seem as if Pitti is very well prepared this time.

Your thoughts please. I added Pitti 4 months back at high. Also Jayant but averaging down Jayant. Not sure if I can do the same with pitti.

My major concern is this does not seem like a recession proof company.
Jayant and GAEL seems like it can manage a downturn...Should I get out of Pitti??

What'sUp Prahalad said...

Praveen:

Pitti laminations has a PBDIT March 2011 of 31.36Cr while market cap is 40Cr so the company is really cheap..

- Yes you cannot classify Pitti as a basic necessity.. but in the future we will have electric cars which will increase the need for electrical motors..

I would buy pitti on declines and hold on to the stock that you hold.. shifting into Jayant is not a bad idea as the dividend is also due and the profits are going to be great for jayant

=happy investing
whatsup-indianstockideas.blogspot.com