Investment guide to new investors. Disclaimer : Investment in equities is subjected to significant risk. Need to read and follow the SEBI guidelines under 'Combined Risk Disclosure Document' before taking any decision to invest in equities. This blog contains only my personal view about market and equities. Any investment decision should be taken with your own analysis and risk.
Pennar Industries Limited is one of the top leading engineering company with expertise in providing engineering products and service in India and abroad. It manufactures precision engineering products like cold-rolled steel strips, special steel, precision tubes, railway wagons /coaches, pre-engineered building systems, sheet metal components, auto components, road safety systems, hydraulics parts, warehousing solutions, water treatment chemical & project solution and oil additives. Company has diversified itself from a steel manufacturer to a high value added diversified products manufacturer. The company is continuously expanding its manufacturing facilities to add new products to its portfolio.
Pennar offers products and solutions through four strategic business units Systems and Projects, Industrial Components, Steel Products & Tubes. Company has three subsidiary companies Pennar Engineered Building Systems Limited (54 %), Pennar Enviro Limited ( 51%) and New Era Enviro Ventures (Karimnagar) Private Limited.
Systems and Project
Systems and Projects includes three business sub segments
1) Railway Wagons and Coaches
2) Solar module mounting structure
3) Storage Solutions
Main clients for this segment includes L&T, Tata power solar, Navalakha, Lanco Solar, ABB, Schneider Electric solaris. In railway segment company mainly serves to Integral Coach Factory, Southern railways, Texmaco, Besco.
Above are business highlight from Q3FY17 investor presentation.
The business of Industrial components for Pennar consists of Press Metal components for Automotive and White Goods. The addressable market size of Industrial Components business is estimated to be over Rs 50 bn. The products offered includes A/C compressor shells, 4 wheeler parts such as car seating system assembly, parts for two wheelers such as disc brakes, and parts for heavy vehicle filters.
Hydraulic Cylinders for different industrial application, earth moving equipments and automobile industry.
Main clients for this segment includes some leading companies like Bailey, Tecumseh products, Emerson Climate Technologies, Endurance Technologies, India Nippon Electricals, IFB, Fleetguard Filters, Wabco India, Brakes India etc.
Steel Products segment consists of Cold Rolled Steel Strips (CRSS) which includes special steels, Cold Rolled Formed Sections (CRFS) used for building products, infrastructure and auto profiles, road safety systems, precipitator and sheet piles.
Steel Products segment is giving service to major customers in the industry such as Lloyds Insulation, Alstom Projects, Lanco Infratech, FL Smidth, Thermax, Johnson Lifts, Adani Power, VECV, L&T, Ashok Leyland and many others.
This segment manufactures (1) Electric Resistance Welded (ERW) pipes, (2) Cold Drawn Welded (CDW) tubes, (3) Air Preheater (APH) tubes, and (4) Indian Boiler Regulations (IBR) tubes.
Products are catered to Automobile, Power, Manufacturing, Structural & General Engineering and several others. The segment has major presence in Tamil Nadu, Karnataka and Maharashtra. The key clients in this segment are Mahindra, Volvo, Eicher commercial vehicles, Hyundai, TVS, Tata Motors, Ashok Leyland, Thermax, BGR, Paharpur, Cethar, KCP, Forbes Marshall, JSW, LMW etc.
Pennar Pre-Engineered Building Systems (PEBS)
Pennar Engineered Building Systems Ltd (PEBS) is engaged in designing, manufacturing, supply and installation of pre-engineered buildings and building components. PEBS Pennar is one of the few companies that offer leak-proof roofing systems in India, having a technical know-how licensing agreement with NCI Group Inc.
Pennar Enviro Limited (PEL)
Pennar Enviro Limited (PEL) deals with Water and Environment Infrastructure business to provide turnkey solutions, Water Treatment Plants, Sewage Treatment Plants, Effluent Treatment Plants, Effluent Recycling Plants, Zero Liquid Discharge Plants etc.
Pennar Enviro Limited also has an extensive range of high performance Specialty Water Treatment Chemicals under the brand name of “PENNTREAT” for treatment of Boiler Water, Cooling Water, Raw and Effluent Water. Product capabilities extend into all aspects of industrial water management such as cooling water treatment, boiler Feed water treatment, raw water/waste water treatment, reverse osmosis membrane treatment, apart from specialty process additives for various process requirements.
PEL is pioneer in the field of fuel additives, it has wide range of fuel additives for treatment of different petroleum fuels in order to enhance the specific performance requirements of each fuel like Furnace Oil, Light Diesel Oil, Superior Kerosene Oil and Low Sulphur Heavy Stock supplying specific premium high technology additives based on fuel characteristic requirements and specific performance enhancements. Pennar Enviro Limited is the authorized manufacturer and marketer of Elf Fuel Oil Additives, having technical collaboration with 'TOTAL' France.
Location and Customer Base
Pennar has five manufacturing facilities in high growth areas and serving almost every major company in its field.
Pennar Industries has strong technical and execution capabilities. Its ability to develop value added products continuously and successfully, make it unique. It has grown small futuristic business into sizable businesses like PEBS, Enviro, Hydraulics, Rail coach components, Industrial & white goods components in short span of 3-4 years. These segments have immense growth potential and expected to grow much faster and bigger in size in next 3-4 years.
Pennar Industries is well poised to capture the growth potential in the field of water treatment, waste management, environment protection, infrastructure, solar, railways and pre-engineered building systems industries. It is expected to be a direct beneficiary of the government’s thrust on solar energy, railways, infrastructure, ‘Make in India’ and ‘Smart Cities’ projects. All the business segment of the company are directly linked to overall macroeconomic recovery.
Pennar Industry has low debt and high operating leverage due to underutilization of capacity. The company has immense operational leverage to take the benefit in almost all of its businesses. Capacity in all segments is underutilized since last 3- 4 years due to lack of demand. Now indian economy is showing good sign of faster recovery and the company is well set to take the advantage with ready to use underutilized production capacity without any major expansion. Even during rough period company was able to post good results.
Systems & Projects to be the key revenue driver for the company. Order flows in the Systems & Project segment (solar panels and railway wagons) is expected to increase following the government’s thrust on higher usage of renewable energy and on upgradation of railway systems.
Company is going to sell non core asset ( 28 MW solar power plant) of New Era Enviro Ventures. Company has started the production of Special grade steel products. It will help to reduce the debt and increase the margins.
Pennar Enviro has very high growth diversified product portfolio of water treatment and fuel additives business with order book near 200 crores. It is expected that it will continue pace in future.
Pennar Industry is in process to merge Pennar Enviro with it.
Now Indian economy is moving very strongly and centre government is executing the development plans very well. Some sectors which are lagging from last 2-3 years has shown very good sign of improvement.
Pennar Industry has wide range of value added diversified product portfolio inline with future growth. Pennar Industry trading in the narrow range of 40 to 54 from last one year. At cmp 46 it is giving wonderful opportunity to invest for long term.