Tuesday, April 19, 2011

Premier Ltd - Rise Of The Phoenix ?

BSE Code : 500540
Website     : http://premier.co.in/
CMP          : Rs 94 (closing price, BSE, 18th April, 2011) ; Rs 93.30 (closing price, NSE, 18th April, 2011)

Premier Ltd (formerly Premier Automobiles Ltd), once a blue chip company from the Walchand group and a pioneer in automobile manufacturing in India, suffered a setback in the early part of the last decade, as labour & finance problems caused it to shut down it's automotive plants .

However in the last few years it has clawed back on to the growth path largely on the basis of it's heavy engineering capabilities , and it is now aspiring to regain it's lost glory in the automotive space.

The company currently has 3 divisions , as follows (source : company website) :

Premier’s engineering division has focussed on alternative energy sources – specifically, the wind energy sector. It has developed and manufactured cutting-edge wind turbine components for companies such as Enercon.

In fact, Premier’s engineering division provides end-to-end solutions for wind turbine component manufacturing. This includes fabrication, machining, blasting and painting of wind turbine steel parts like disc rotors, stator rings, stator carriers, rotor housings and supporting structures.

Machine Tools
Premier’s CNC Machine Division has consistently distinguished itself by setting new benchmarks for industry excellence. Today, the company’s focus on high-end technology has resulted in a sophisticated line of CNC Machine Division.

Today, CNC Gear Cutting machines, Machining Centers, CNC Vertical Turning & Turn mill Centers and custom-built Special Purpose Machines bearing the trusted Premier label are regularly used by leading industries.

Premier gave India the ubiquitous Premier Padmini. Today, Premier’s automotive division has reentered the passenger vehicle segment with the launch of India's first compact diesel SUV – the RiO.

Other products in the newly launched range of commercial vehicles designed specifically for Indian roads are : Sigma - a compact, multi-utility diesel van, and Roadstar - a highly versatile pickup truck.

So what's interesting ?
The company has recently indicated that it plans to achieve revenues of Rs 700 Cr in 3-years time & Rs 1000 Cr within the next 5 years (source : Corporate India magazine, pgs 52-54 in issue for the fortnight ending 31.3.2011). Now that's 3 & 4 times the current turnover.

It plans to do so on the basis of organic & inorganic growth. To fund acquisitions & further expansions, as well as retire debt, the company plans to monetize it's surplus land out of it's holding of about 216 acres at Dombivli near Mumbai.

If the company walks it's talk and is able to deliver on it's promises, there is a clear chance of re-rating in the coming 3-5 years.

Unlocking the value of it's land holdings will be critical to this, as currently interest burden takes away a large chunk of the profits, besides forcing the promoters to pledge a large part of their holdings as collateral for the increasing borrowings required to sustain the company's expansions.

Over the last couple of years, the promoters have steadily shored up their shareholding in the company, indicating their faith in the company's prospects.

To conclude, the author recommends investors to track this company closely & once convinced that the company is delivering on it's plans, investors can take an appropriate call.

Author : Bosco Menezes

Recommendation Date : 19.04.2011

Disclaimer/Disclosure :
At the time of writing this article the author has a position in the stock covered by this report. The author or any of his dependent family members may make purchases or sales of the securities mentioned in the report while the report is in circulation. Readers/recipients of this report are strongly advised to do their strict due diligence, and should be aware that the value of investments can go down as well as up. The author shall not be liable for any direct or indirect losses arising from the use of the contents of this report, and readers are therefore cautioned to use the information contained herein at their own risk. In fact, readers would do well to seek the advice of a qualified independent advisor. The author certifies that all of the views expressed in this report accurately reflect his personal views about the subject company at the time of writing this report. Feedback / brickbats may be hurled at the author at boscom@gmail.com .