| Experienced management and long track record of operations
Incorporated in 1972, PEIL has a long track record of operations of more than four decades. Further, the Chairman and Managing Director Mr. J Surendra Reddy also has more than four decades of experience in the engineering industry. The company at the time of establishment focused on producing bulk material handling systems. In 1980, the company forayed into manufacture and supply of cement plants. The company has executed cement plant projects for J K Cement Works, Government of Republic of Congo, Asian Paints Limited, and power plant projects for NTPC, Bharat Heavy Electricals Limited. The company has presence in over 20 countries including Japan, USA, UK, Sudan, and Germany. PEIL collaborates technically with FAMAK S.A. in Poland and Tahiheiyo Engineering Corporation (TEC) in Japan.
Acuite believes PEIL will continue to benefit from its long presence in the industry and established customer relations over the medium term.
Improvement in scale of operations, albeit decline in operating profitability
In FY2024, the company recorded a significant growth in revenue to Rs. 153.67 Cr., compared to Rs. 124.00 Cr. in FY2023 and Rs. 120.84 Cr. in FY2022. This growth was primarily driven by increase in higher orders execution during the year. Further, in 8MFY2025, the company has reported revenue of ~Rs. 100.65 Cr. However, the operating margin for FY2024 declined to 12.13 %, in FY2024 from 16.63 % in FY2023. This decrease in operating margins is due to lower share of civil works in the total revenue. The turnover of the FY2023, majorly consisted of civil works (service work) (where margins are higher) than manufacturing of plants. However, PEIL’s PAT margins slightly improved and stood at 5.26 % in FY2024 as against 5.04% in FY2023. Further, the company has an outstanding order book position of ~Rs. 537.81 Cr. as of 27th November 2024 reflecting healthy revenue visibility over near to medium term.
Going ahead, the ability of the company to improve its revenue while improving its profitability will remain key monitorable.
Healthy Financial Risk Profile
The financial risk profile of the company is healthy, marked by high networth, low gearing ratios and moderate debt protection metrics. The net worth of the company stood at Rs.131.01 Cr. as on March 31, 2024, as against Rs. 127.01 Cr. as on March 31, 2023. The total debt of the company stood at Rs. 29.59 Cr. as on March 31, 2024, as against Rs. 33.98 Cr. as on March 31, 2023. Promac has planned a Capex of approximately Rs. 50.00 Cr, of which Rs. 25.43 Cr. is expected to be completed by FY2026. The company intends to raise Rs. 18.89 Cr. through debt, with the remaining amount to be funded by internal accruals. Through this CAPEX, the company plans to acquire laser cutting machinery, gearbox machinery, and tunnel and boring machines, among other equipment’s. The gearing of the company stood low at 0.23 times as on March 31, 2024, as compared to 0.27 times as on March 31, 2023. The TOL/TNW (Total outside liabilities/Total net worth) stood at 0.91 times as on 31 March 2024 as against 0.94 times the previous year. The Debt- EBITDA of the company has improved and stood at 1.47 times as on March 31, 2024, as against 1.64 times as on March 31, 2023. The company has moderate debt protection metrics with Interest coverage ratio (ICR) and debt service coverage ratio (DSCR) of 2.98 times and 1.83 times respectively in FY2024 as against 2.26 times and 1.50 times respectively in the previous year.
Acuite believes that PEIL’s financial risk profile will continue to remain healthy on account of steady accruals.
|
| Improved albeit Intensive nature of working capital operations
The working capital management of the company improved yet remain intensive in nature marked by improving Gross Current Assets (GCA) of 423 days as on March 31, 2024, compared to 522 days as on March 31, 2023, owing to high debtor days. The debtor days are high and stood at 310 days as on March 31, 2024, as against 382 days as on 31st March 2023. Debtors include retention money of Rs. 35.40 Cr. in FY2024. The inventory days improved and stood at 58 days as on March 31, 2024, as against 76 days as of March 2023. The creditors days improved yet remain stretched and stood at 175 days as on March 31, 2024, as against 206 days as on March 31, 2023. However, the average utilization for fund-based limits remained moderate, averaging around 74.96% over the last twelve months ending Oct 2024.
Acuite believes that working capital operations of the PEIL will remain at similar levels over the medium term due to company operating in the working capital-intensive industry.
|
