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Hey Everyone

The Next Investment Idea Pennar Industries limited is a very diverse company. The peculiar feature about this company is the efficiency with which it operates across all segments. It operates in Railways, Solar module mounting structures, Automobiles, Tubes, various steel products, Effluent treatment plants etc.

The Company


Pennar Industries Limited is one of the leading engineering organizations in India well known for its expertise in providing engineered products & services.

Pennar Industries as a standalone entity consists of the following products:
  1. Systems and Projects – Railways and Solar MMS Components
  2. Industrial Components – General Engineering and Automotive Components
  3. Engineered Tubes – ERW and CDW Tubes
  4. Steel BU - Cold Rolled Steel Strips and Formed Sections (Steel BU)


Pennar also has two subsidiaries:
  1. Pennar Engineered Building Systems
  2. New Era Enviro Ventures (Karimnagar) Private Limited


On approximate basis the standalone entity derives: 

25% of its revenue from various steel products,
50 % through  railway wagons, passenger coaches and solar module mounting solutions,
13% through tubes,
12% through other Industrial components

For detailed information about its various products, visit : http://www.pennarindia.com/business-lines.html



Fundamental View

The Company has recorded a lifetime high consolidated sales of Rs. 1542 Cr (Gross). during the year ending March 17. Moreover, its sales has been consistently in increasing trend as shown under


Below is the comparison of financial ratios of Pennar Industries Ltd with its peers :

Basis
Pennar Industries Ltd
Uttam Value Steels
Mahamaya Steel Industries
Bhushan Steel
Remarks
Assumptions
1
P.E Ratio (TTM)
19.98
Loss Making
30.15
Loss Making
Clear Winner

2
P.E.G Ratio
0.59
Loss Making
9.73
Loss Making
Very Undervalued
Based on compounded growth rate of last 4 year EPS
3
Market Cap to Sales
0.61
0.10
0.38
0.13
Considering the amount of debt and lower margins of its peers, pennar can be considered fairly priced
Based on sales of year ended March 2017
4
Operating Profit Margin
9.02
Operating Loss
0.47
17.67
Bhusan seems better here, but nothig is left to shareholders because of its disastrous Debt-Equity ratio
Based on year ended 2016 figures, annual audited results of year ended 2017 not yet furnished
5
Return on Capital Employed
5.78
-61.01
-12.18
-7.4
Pennar Proves to be an exceptional performer in the space
Based on year ended 2016 figures, annual audited results of year ended 2017 not yet furnished
6
Debt-Equity Ratio
0.54
Negative shareholder's funds
0.89
9.32
Lowest Debt-Equity ratio in the industry
Based on year ended 2016 figures, annual audited results of year ended 2017 not yet furnished
7
Asset Turnover Ratio
108.66
88.32
146.95
21.79
Pennar Fairs in efficiency too
Based on year ended 2016 figures, annual audited results of year ended 2017 not yet furnished
8
Price to Book Value
1.7
-11.28
1.41
0.18
Fairly Priced

9
Operating Cash flow to sales ratio
11.54
6.55
8.15
Negative cash flow from operations
Pennar Proves to be an exceptional performer in the space
Based on year ended 2016 figures, annual audited results of year ended 2017 not yet furnished


It is to be noted that these ratios are based upon standalone figures, on consolidated basis pennar trades just at P.E. of 13 and operating margin of around 12% 

Technical View

The stock has recently crossed its 50 DMA of Rs. 47.40 and is consolidating well about these levels, one can look into the script with stop loss 45.20 which is its 200 DMA. At CMP of Rs 50 the risk reward ratio therefore looks favorable.

In Medium term charts, the stock has formed a Bull Flag which is a bullish pattern and short term traders too can look into the stock for good bucks. below is the explanation of the pattern


CONCLUSION

Pennar is BUY at CMP of Rs 50 with a Stop of Rs 45.20, as per our portfolio guidelines short term traders can expect 30%+ and long term investors can expect 100% returns in span of 24 months.

Best Wishes for your Investment !!!

Thanks !!!



Note: The Above is just a information available in public domain and therefore, should not be taken as a research report.

Registration status with SEBI:  I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations.

Disclosure : I do not have any holding directly/indirectly in Pennar Industries Limited.


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