A thread on defence manufacturing company-
Premier Explosives Ltd๐ฃ
Mcap - 872 cr
PE - 131 (Looks ๐๐ฅ๐ฉ๐๐๐๐ก๐ก๐ฎ high)
[Refer to Valuation framework in below thread]
Fueling India's Defence Indigenization
#PREMEXPLN #Premier_Explosives
Premier Explosives Ltd๐ฃ
Mcap - 872 cr
PE - 131 (Looks ๐๐ฅ๐ฉ๐๐๐๐ก๐ก๐ฎ high)
[Refer to Valuation framework in below thread]
Fueling India's Defence Indigenization
#PREMEXPLN #Premier_Explosives
๐นAbout Company -
Premier Explosives Ltd (PEL) is engaged in the manufacture of high energy materials and allied products for the defence, space, mining and infrastructure industries.
Premier Explosives Ltd (PEL) is engaged in the manufacture of high energy materials and allied products for the defence, space, mining and infrastructure industries.
โฉIt has 3 business divisions:
1) Commercial Explosives-
The company produces a range of products under this category which includes bulk explosives, cartridge explosives, cast booster, detonators, detonating fuse, etc
These products are used by mining & infrastructure industries
1) Commercial Explosives-
The company produces a range of products under this category which includes bulk explosives, cartridge explosives, cast booster, detonators, detonating fuse, etc
These products are used by mining & infrastructure industries
2) Defence explosives -
It manufactures & supplies solid propellants to Indian defence for missiles like Akash, Astra, etc
It also manufactures explosive bolts, pyro actuators, smoke markers, cable cutters & many other products including blazer plates for Indian defence services.
It manufactures & supplies solid propellants to Indian defence for missiles like Akash, Astra, etc
It also manufactures explosive bolts, pyro actuators, smoke markers, cable cutters & many other products including blazer plates for Indian defence services.
3) Operations & Maintenance services -
According to the Government Owned & Corporation Operated ("GOCO") principle, PEL is undertaking O&M services for solid propellant plants of ISRO at SHAR (contract for 10 years received in Jan-19), Sriharikota and DRDO at ASL, Jagdalpur.
According to the Government Owned & Corporation Operated ("GOCO") principle, PEL is undertaking O&M services for solid propellant plants of ISRO at SHAR (contract for 10 years received in Jan-19), Sriharikota and DRDO at ASL, Jagdalpur.
What's cooking ?
๐๐ฑ๐ฉ๐ฅ๐จ๐๐ข๐ง๐ ๐๐๐๐ญ๐จ๐ซ ๐๐จ๐ซ ๐๐ซ๐๐ฆ๐ข๐๐ซ ๐๐ฑ๐ฉ๐ฅ๐จ๐ฌ๐ฏ๐ข๐ -
On 11th July, 2023 - It won the biggest order worth Rs. 552 cr from Ministry of Defence & Indian Air Force for supply of Chaffs & Flares to be executed within 12 months.
๐๐ฑ๐ฉ๐ฅ๐จ๐๐ข๐ง๐ ๐๐๐๐ญ๐จ๐ซ ๐๐จ๐ซ ๐๐ซ๐๐ฆ๐ข๐๐ซ ๐๐ฑ๐ฉ๐ฅ๐จ๐ฌ๐ฏ๐ข๐ -
On 11th July, 2023 - It won the biggest order worth Rs. 552 cr from Ministry of Defence & Indian Air Force for supply of Chaffs & Flares to be executed within 12 months.
PEL is only Qualified Indian company for Counter measures (Chaffs & Flares).
Above mentioned order will change the trajectory of the company.
It is 2x of the highest ever annual revenue achieved by it.
Both the products are consumables & we can expect such orders in future too.
Above mentioned order will change the trajectory of the company.
It is 2x of the highest ever annual revenue achieved by it.
Both the products are consumables & we can expect such orders in future too.
What are Chaffs & Flares ?
They are used in military operations to protect aircraft from guided missiles.
Chaff is a radar jamming material that is dispersed in air to create false targets, while flare is a heat-emitting material that is deployed to divert heat-seeking missiles.
They are used in military operations to protect aircraft from guided missiles.
Chaff is a radar jamming material that is dispersed in air to create false targets, while flare is a heat-emitting material that is deployed to divert heat-seeking missiles.
๐ฏRobust Order Book
On 31st March, 2023, Premier Explosives had an order book of INR 521 cr. Subsequently, it has received new orders worth INR 696 cr.
Now, the total order book stands all time high at INR 1216 cr
On 31st March, 2023, Premier Explosives had an order book of INR 521 cr. Subsequently, it has received new orders worth INR 696 cr.
Now, the total order book stands all time high at INR 1216 cr
PEL has a high book to bill ratio of 6x.
The majority of the order book needs to be executed within a period of 12-18 months.
This provides a high revenue visibility in short to medium term.
The majority of the order book needs to be executed within a period of 12-18 months.
This provides a high revenue visibility in short to medium term.
๐นOrder Book Mix -
The management has shifted its attention to high margin military industry & decreased exposure in the bulk explosives, where it was difficult to pass on growing raw material cost.
Majority of this order book (82%) is from the margin accretive defence segment.
The management has shifted its attention to high margin military industry & decreased exposure in the bulk explosives, where it was difficult to pass on growing raw material cost.
Majority of this order book (82%) is from the margin accretive defence segment.
๐ญManufacturing Facilities -
Recently, it has commenced manufacturing at its new plant at Katepally & gradually this will start contributing meaningfully to the revenue.
It plans to incur Rs. 28 cr of capex in FY24, mostly for defence sector & strengthening existing facilities.
Recently, it has commenced manufacturing at its new plant at Katepally & gradually this will start contributing meaningfully to the revenue.
It plans to incur Rs. 28 cr of capex in FY24, mostly for defence sector & strengthening existing facilities.
๐นKey Clients -
Reputed client profile in commercial explosives, defence and aerospace segments.
Reputed client profile in commercial explosives, defence and aerospace segments.
๐Valuations
With soaring orderbook which is to be executed within a year, We expect significant jump in revenues and profits to the tune of 150% and 588% respectively for FY24. We also expect margin expansion of 600 bps led by operating leverage
Thus, trades at ๐๐๐ฑ FY24 eps
With soaring orderbook which is to be executed within a year, We expect significant jump in revenues and profits to the tune of 150% and 588% respectively for FY24. We also expect margin expansion of 600 bps led by operating leverage
Thus, trades at ๐๐๐ฑ FY24 eps
๐นStrengths -
โ First private manufacturer and supplier of Solid Propellants in India.
โ First in India to manufacture Explosives and Detonating fuse with indigenous technology.
โ Only Indian company in the export of fully assembled rocket motors.
โ First private manufacturer and supplier of Solid Propellants in India.
โ First in India to manufacture Explosives and Detonating fuse with indigenous technology.
โ Only Indian company in the export of fully assembled rocket motors.
โ
First in the world to produce Safer and Greener NHN detonators on commercial scale.
โ Over 850 Dedicated and Experienced Employees and 100 Engineers/Scientists.
โ Commercial explosive developed through benchmark R&D.
โ State of the art manufacturing facilities.
โ Over 850 Dedicated and Experienced Employees and 100 Engineers/Scientists.
โ Commercial explosive developed through benchmark R&D.
โ State of the art manufacturing facilities.
โ ๏ธRisk
โช๏ธRaw material price fluctuation (Ammonium nitrate and fuel oil)
โช๏ธDelay in order execution
โช๏ธFailure to get repeat orders
โช๏ธClient concentration risk
โช๏ธCyclical mining/ infrastructure industries
โช๏ธWorking capital intensive business
โช๏ธRaw material price fluctuation (Ammonium nitrate and fuel oil)
โช๏ธDelay in order execution
โช๏ธFailure to get repeat orders
โช๏ธClient concentration risk
โช๏ธCyclical mining/ infrastructure industries
โช๏ธWorking capital intensive business
Disclaimer - This is not a stock recommendation. Investments in securities market are subjected to market risks. Do consult your financial advisor. Nirmiti Investment Advisors & clients may have holding in the above-mentioned securities which is the subject matter of advice.
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