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Pitti Laminations Limited is
a manufacturer of electrical laminations and a one stop solution provider for
critical sectors. Manufactures electrical laminations up to a diameter of 1300
mm (51") for application in industrial motors, DC machines, alternators,
traction motors, pumps, train lighting generators, aeronautics, medical
diagnostics equipments, windmill generators, laminations for specialised
applications, die-cast rotors, assembled stators and built-up rotors duly
balanced. The companies products are used in sectors such as Power Generation, Transportation, Mining,
Industrial motors, Locomotives, Aerospace, Automobile, Oil & gas
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Pitti has two manufacturing facilities, which are located on 18
acres of own land at Nandigaon village,Hyderabad, Andhra Pradesh. It completed
the expansion of the Hyderabad facility in March 2012. This has taken the
overall capacity to 30,000 tpa laminations, 2,000 core-dropped machined stator
frames and 3,000 machined components. (capacity was 10000 tpa in Jan 2008).
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FY2008-13 revenue and EBITDA CAGR of 13% and 17% , respectively .
The sales and profits were growing at a CAGR of 28% in the last 3 years prior
to FY14
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The company has about 25 clients.The list of clientele includes
reputed engineering and electrical concerns such as GE,Otis, Siemens, Cummins,
BHEL, Cromptons, ABB, Alstom, Andritz and others. The company has been an
outperformer in the industry till 2012.
But due to bad global economic scenario its exports got affected. Even thought
the sales are growing on the domestic front, the international exports has come
down drastically. GE contributed to more than 70% of the company's
sales.Postpontment of orders by GE and company's main dependence on them was the
reason for fall in exports.
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In 2012, the company alloted shares to promoters at 39.15rs. This
took the promoters share from 40% to 60%. The company came out with open offer
at 41. SEBI directed the company to increase the open offer and the issue is in
supreme court now. Even if the open offer is not raised, we have a cusion of 41
rs as a support.
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This year the company spent 16 crs on improving its maching
facility and to remove bottle necks in the line. This Q2, the management has
indicated that the company doesn’t plan to raise more debt or equity. The interest
payment and debt levels of the company has come down sharply QOQ. The money
spent on machining facility will show its effects from Q1 FY15 and allows the
company to target consumer segment. Gross block in plant and machinery has
increased from 6100 to 9150 in 2 years
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Last year the company’s capacity utilization was 64% and this year
due to bad export orders, the utilization would be around 50%. So I don’t see
any reason for the company to do more capex in near term.The management wants
to make Pitti a 1000 cr turnover company in next 4 years(currently 350 crs)
while maintaining the EBITA margins.
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Being in Andhra Pradesh, the company used to face 6 hr daily power
cuts. The management says that power is no more an issue for the company.
· Recently the company has
entered into new geographies such as Australia and Brazil . They have also
ventured into casting business through Pitti Castings . As per the
management,the company has been developing several new products, commercial
supply to begin in this financial year.
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The last quarter of this financial year saw the exports picking up
again.Also the addition of Chittaranjan
Locomotive Works (CLW) to the clients list enables the Company to enter the
railways sector in India.
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The company is a net exporter. Though the main raw material(high
quality steel ) is imported, the export revenues are twice as much import
bills. The company plans to maintain Balanced exports and domestic orders to a
healthy 50:50 level
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Even when the user industry is going through such bad times, the
company never reported a loss in any quarter. The overall demand outlook from
the Indian power sector is to improve going forward driven by various
initiatives undertaken by the government to facilitate commissioning of stalled
projects. The company also expects the exports to go up and aims a turnover of
20000tpa for FY15.As the capacity utilization goes up, there should be a
disproportionate increase in the top-line and the bottom line.In 2011, the
company reported its best ever numbers and an eps of 17 rs.At the cmp of 40 rs,
the company is available at a market cap of 60 crs Any improvement
in the user industries will help the company go back into its original growth
orbit.One should watchout for its case with SEBI regarding open offer
Disc:-Hold few shares of Pitti Laminations (mainly for academic purpose)
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