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Tuesday, October 04, 2016

Permanent Magnets: Hidden Gem, Value Buy!!


Permanent Magnet  www.pmlindia.com

CMP: 18.8
Market Cap: 16.17Cr
Annual Sales March 2016: 67.7Cr
PBDIT: 3.81Cr
Net Profit: 0.93Cr (93 Lakhs)
EPS: Rs1.08
Debt: Long term: 3.82Cr
Debt Short term: 13.82Cr
Annual Report March 2016

Permanent Magnets Limited is one of the flagship companies of Taparia Group, Mumbai and also one of the leading manufacturers of Alnico Cast Magnets and Yoke Assemblies. It is a front-runner among young, dynamic and growing companies in India.

PML magnets are used extensively in key industry sectors such as electronics, electricity meters, automobile industries, telecommunication, defense, space research, aeronautics, railways and electricity generation.

The technical collaboration started in 1963 with “Centro Magneti Permanenti” (CMP) Italy. In 1973, PML started manufacturing Ferrite magnets. In 1983, PML upgraded technology with help of Dowa Mining (Japan) and Sumitomo (Japan).

PML started manufacturing magnetic assemblies such as Separators, lifting devices, holding devices etc. in 1984. In 1996, PML implemented the ISO 9001:1994 system for the first time. PML has been growing since then in the field of Magnets, Assemblies, Shunts and High Permeability components.

PML is into manufacturing electricity meter components (electro mechanical meters) used in metering systems installed in households. it also manufacturers a large variety of magnetic material equipment for industiral as well as personal use.
With the move worldwide to smart electronic meters (meters which provide additional data such as energy utilization, remote meter reading..) the company had to retool itself to manufacture these smart electronic meter components.
Smart meters consist of digital displays for displaying detailed energy usage,and the cost related to the energy usage. With the detailed energy usage and cost displayed on digital display, the consumers are able to understand and act accordingly to conserve the energy For instance; the consumers adjust their consumption patterns when they discover the amount of power used and the cost of operation of the several appliances.

The major appliances in the home, such as washing machines can be automated with the help of smart meters. This allows such appliances to take various advantages, such as time-of-use tariffs. With the two-way communication offered between intelligent household appliances and meters, the consumers are able to make note of the power being consumed. By two-way communications, energy service provider or utilities are also able to control elements of the consumer’s usage for lowering their bill.
Taparia group is a well established name in "Hand tools market and is a market leader in India" so the management is a well established business group.

PML India intends to address the smart meter market in India and abroad and the management seems to be experienced in this business (as they used to manufacture magnetic components for electro-mechanical electricity meters before.)

Valuation wise due to low profitability it is not yet clear how it will all pan out. But looking at the addressable market and the growing demand and strong promoter background, I expect Permanent magnet valuation to rise further as the firm becomes entrenched in the market, fundamentals improve and the market acknowledges its position.

Fair valuation will be a market cap equal to 1 times sales.  liquidity is very low so one needs to patiently accumulate. Long term value buy, multibagger


Karthikraja K said...

Pl sahre your views on JMA (NSE listed) & Sreeleathers.
both ROCE looks very good.

PML needs to be accumulated on dips. presently the MoS is little i guess.


Udaykumar said...

Hello whatsapp ji...nice analysis on pml.. Can you shed some light on the winding orders issued to pml back in 2015 and what is the current state of the court matters.. Thanks in advance for your insights

What'sUp Prahalad said...

UdayKumar ji:
From the annual report year ending March 2016 Page:54
Honorable Bombay High Court has passed winding up order on the petition of M/s Savino Del Beno “Petitioner” (Freight forwarder agent & CHA of company).
Facts of the case - During the year 2010, Petitioner has raised bills for their services but failed to submit Original EP copy to the company which is essential documents to claim Excise rebate, and accordingly company withheld their payment. Subsequently, petitioner has filed winding up petition against the Company of dues of Rs. 12,95,305/-. Honorable Mumbai High Court has passed an order allowing the petition and issued direction for appointment of official liquidator in winding up order.
On the appeal against this order made by the company before Honorable Bombay High Court, Honorable Bombay High Court has given interim stay order against the winding up order passed (against the Company) dated 15/04/2015. Company has deposited Rs. 19,05,179/- with interest as per direction of honorable Bombay High Court. Matter is pending before Bombay High Court. Amount deposited with court shown in Balance sheet under Current Assets

=happy investing

Udaykumar said...

Thanks very much whatsapp ji.. Does this impact the companies long term story in any way

Udaykumar said...

Thanks very much whatsapp ji.. Does this impact the companies long term story in any way

What'sUp Prahalad said...

UdayKumar ji:

there is Zero impact of this on Permanent magnet future..

Long term there is lot of value to be unlocked as the company increases its position of strength..

=happy investing

Udaykumar said...

Thanks very much whatsapp ji

Udaykumar said...

Dear whatsappji... Any upcoming catalyst in the name

Anonymous said...

has anything changed in the story? stock is on a downhill slope, still good to buy?

What'sUp Prahalad said...

Yes Permanent Magnet Stock is worth buying .. its a long term story.. but could give short term returns also... as the indian market is "Hot"... the real underlying reason is the "New Pension scheme"

govt of india has stopped pension for all Govt. employees except maybe the defense personnel..

and all govt servants have been moved to NPS scheme.. where a portion of pension money is being invested in stocks on a regular basis by the govt of India..

So the question is: does this Bull run have legs??? Absolutely!! and its backed by the govt of India!!!

=happy investing

harsh said...

Hi Sir. Recent results seem encouraging. Your views please.

What'sUp Prahalad said...

Harsh ji,
Permanent Magnet is a long term value buy.. could be a multi-bagger as the addressable market for electric vehicles and electric meters is huge..

So one can buy with long term prespective.. only negative is no dividend but then its a small size company..

=happy investing

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