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Thursday, August 20, 2009

Premier Ltd:Is it a buy,hold or sell?

Scripscan:Premier Ltd
Traded in:Nse-bse

Story:According to the management,"2008-09 was a year of consolidation and preparing for the future of the Company.The Gear Cutting Machine Tool Business declined nearly 40% this year. This equipment is mostly purchased by the auto and auto component industry that were the worst affected by Indiaʼs economic slowdown. However, the Companyʼs experience and expertise in large, specialized machine tools for heavy engineering applications enabled it to more than make up this loss with orders from public sector enterprises and large private sector companies. This sector continues to show robust potential this year and the product mix will be nearly 90% in non-auto related heavy machines driven by the substantial investment and modernization plans of the railways, defence and public sector.The Machine Tool divisionʼs Rs.100 crore expansion and modernization program has been mostly completed and this should yield a nearly 400% productivity increase while reducing factory through-put time by nearly 50%.Premier Ltd"s Engineering Business continues to show a robust 60% growth in sales and profitability. Although supplies to recession hit automotive clients like TATA Motors and Carraro declined during the year, this was more than made up by increased business from the wind energy sector.The company is currently working on several new projects with companies like BEML, Cummins and JCB for their complex engineering component requirements in the earth moving, power gen-set and metro rail sectors. This division should maintain its high growth during the current year, continuing to contribute significantly to Companyʼs bottom line. Although the Vehicle Business could not progress in terms of sales and profits, it focused on product perfection and developing variants like ambulance, garbage tipper, school bus, CNG pickup truck etc.Premier Ltd's products are all well accepted by the market. The only deterrent now to increased volumes is the availability of vehicle finance. As a large, reputed and established player in the Machine Tool business, coupled with its “state of the art” production facilities, The company aims to soon become the industry leader in India and, in parallel, globalize the business through strategic acquisitions in USA or Europe.The Engineering Business will continue to partner with blue chip clients moving up the value chain from commodity, automotive component production to providing highly complex, customized engineering solutions to the energy and infrastructure sectors. This will act as an entry barrier for competitors while improving its margins.The Vehicle Business will focus on the light utility or non-passenger car segment because it needs less investment for frequent model changes, lesser advertising and promotion and does not directly compete with global carmakers. With its low capital investment and break even, this project can generate good profitability without needing large volumes.Guess I mentioned everything on the operatonal front now lets move further on,There is one other factor, which is pretty interesting. I have been looking at the ownership pattern of the stock for the last 3 months and have found that the promoters are buying into the stock. When promoters buy into a particular counter, it gives me a sense of relief. That is reinforced by numbers and I know that I am in a very safe direction.The company is a liberal dividend payer and these year too has paid 25% dividend.With these year expected to be better,The shareholders can expect decent return from the company in the longer run.A good buy at dips.

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