PRECISION WIRES INDIA

King of enameled copper wires

Over three decades old, Precision Wires India, the largest manufacturer of enameled copper winding wires in the country, has three manufacturing facilities located at Silvasa, Dadra Nagar Haveli and Palej. These units have a combined manufacturing capacity of enameled round winding wires, continuously transposed conductors and paper insulated copper conductors. These wires are widely used by the electrical and electronics industry across the globe in equipment like rotating machines, alternators, power and distribution transformer ballast, auto electrical, household appliances, fans and switchgears.

The company is doing very well on the financial front, with its compounded sales growth for the last five years being worked out at a CAGR of 25 per cent and its compounded profit during the last five years growing at a CAGR of 23 per cent. What is more, prospects for the company going ahead are all the more promising. Consider:

• As the requirement of power generating equipment is increasing, the company is expected to benefit substantially from it. At present, of the total sales, about 35% comes from the electrical equipment industry, 20% from the other power sector including generation and the T&D sector, 20% from the auto industry and the rest from various other sectors like consumer durables and infrastructure. The company deals directly with OEMs and with every organized player which requires winded wires. As demand for wires from all these segments is on the rise, Precsion can expect a sustained uptick in its topline as well as bottomline.
• The demand of transformers, be it power transformers or distribution transformers, and other electrical equipment, be it conductors, insulators or rural electrification, is gradually picking up. This fresh demand, along with the replacement demand for winding wires, is gradually seeing improvement. Further, more and more orders expected in winding wires will be towards 400 KV and 765 KV wiring lines where there is more value addition, limited competition and better margins. PWIL, being a market leader in winding wires, will benefit the most from the recovery in electrical equipment and power industries.

SALES TREBLES

• With the rising demand for its products, the company is going from strength to strength on the financial front. During the last 12 years, its sales turnover has almost trebled from Rs 874 crore in fiscal 2011 to Rs 2,683 crore in fiscal 2022 with operating profit almost doubling from Rs 63 crore to Rs 117 crore and the profit at net level more than doubling from Rs 31 crore to Rs 63 crore. The company’s financial position is very strong, with reserves at the end of March 2022 standing at Rs 376 crore – over 31 times its small equity capital of Rs 12 crore. The company is steadily reducing its debt burden and its borrowings have come down sharply from Rs 96 crore in fiscal 2013 to Rs 20 crore in fiscal 2022.

Taking into consideration Precision’s sustained growth potential, the company will very soon emerge as a 100 per cent debt-free corporate entity.

The company’s fortunes are largely linked to the consumer durables and industrial equipment sectors. As both these sectors are doing very well, it will have a positive impact on the profitability of the company.

The company’s stock price, which had fallen sharply after a serious setback in 2018-2019, has made a smart recovery and during the last 52 weeks has almost doubled from Rs 38 to Rs 75. After skipping the dividends for fiscal 2019-20 and 2020-21, the company has paid a bumper dividend of 130 per cent and also proposed a 1:2 bonus issue. Discerning investors can confidently invest in this stock with a long-term perspective.

PERFORMANCE INDICATORS (Rs. in crore)

SAKAR HEALTHCARE

Oncology segment to boost growth

Ahmedabad-based Sakar Healthcare is one of the fastest-growing pharma companies in the country, engaged in the manufacture of pharmaceutical products in various forms such as liquid orals, cephalosporin tablets, capsules, dry powder syrups and dry powder injections, liquid injections in ampoules and vials, and lyophilized injections. The company also operates as a contract development and manufacturing organization (CDMO), being EU GMP approved for leading multinational pharmaceutical companies. It has four state-of-the-art manufacturing plants which are certified by ISO 9001-2015 BVQI, WHO-GMP, CGMP in addition to approvals by the National Drug Authorities of Uganda, Kenya, Yemen, Ethiopia, Congo, Ghana, Zimbabwe, Cambodia, Vietnam, Malawi, Namibia, Nigeria, Cote d’Ivorie, the Philippines and Peru. The company also caters to Sri Lanka, Sudan, Myanmar and Mauritius, Costa Rica, Panama, El Salvador and Paraguay. It boasts of some of the most modern and state-of-the-art facilities for the manufacture of various products. These facilities are approved by the regulators of multiple countries.

The company is steadily growing on the financial front, with compounded sales growth during the last 10 years being at a CAGR of 23 per cent and profit growth at a CAGR of 31 per cent. What is more, prospects for the company going ahead are all the more promising.Consider:

• The company has entered the anti-cancer (oncology) space with the setting up of a greenfield oncology project at a total cost of Rs 145.76 crore, of which Rs 14.85 crore was raised from an FII, Swiss-based HBM Healthcare. As cancer is the second largest cause of death in India, the Indian market is characterised by a huge demand for cancer drugs.

The oncology unit has already gone on stream. The laboratory set up for R&D, analytical development and formulations was ready by September 2021. The formulation unit has started commercial operations in October 2021 and the operations of the API unit and that of the injectable unit commenced operations from December 2022. This entry into oncology – the fastest growing therapeutical segment with high entry barriers — is expected to give a big fillip to the company’s growth for the next few years. This state-of-the-art manufacturing facility has been designed according to USFDA standards and will help the company sell its onco products in the regulated markets of the US and Europe.

FINANCIALS SOAR

• With rising demand for the company’s products at home a well as abroad, its financial performance is going from strength to strength. During the last 12 years, its sales turnover has expanded more than six times – from Rs 20 crore in fiscal 2011 to Rs 128 crore in fiscal 2022, with operating profit also shooting up almost six times from Rs 5 crore to Rs 29 crore and the profit at net level surging ahead 15 times – from Rs 1 crore to Rs 15 crore. The company’s financial position is improving, with reserves at the end of March 2022 standing at Rs 110 crore – almost six times its equity capital of Rs 19 crore. Its debt was very low three years ago, but now the debt burden has shot up to around Rs 100 crore. However, the management hopes that with the oncology project earning a good profit, the company will be able to gradually reduce the debt to a negligible level in the coming years.

BULLISH ON STOCK

In October 2016, the company had come out with an IPO at a price of Rs 50. Though the company has not paid any dividend so far, knowledgeable investors have started buying its shares and the stock price has, in the process, crossed the Rs 200 mark. Observers feel that as the company is performing very well, shareholders will be rewarded in the very near future. Discerning investors can certainly go for these stocks with a long-term perspective.

PERFORMANCE INDICATORS (Rs. in crore)