Saturday, October 1, 2016

Pricol Ltd. - Investment Research Report

company logo of Pricol limited
Brief Value Investing Research Report


Basic Filtering Criteria:


If you apply the stock filter for a price to earnings ratio of 1-10 this stock will not be caught in the net at all and therefore as per our value investing filtering criteria this stock is not worth further investigation at all.

Still this research report for Pricol Ltd. was prepared since one of our readers had specifically queried about this stock. Therefore we go ahead and gather further information that is readily available on many financial websites, which depicts as follows:


Basic Filtering Criteria:
Importance
Minimum Required

Prcol Ltd.
Pass/ Fail
1
Turnover (Rs. Crore/ Rs. 10 million)
Basic
1000
1126.51
2
Market Capitalization (Rs. Crore/ Rs. 10 million)
Basic
1000
1048.01
3
Price to Earnings Ratio
Critical
Less than 10
24.26
4
Price to Book Value
Critical
Less than 1.5
3.36
5
Dividend Yield
Critical
4-5%
0.90%
6
Uninterrupted Dividend Payment Record
Critical
Minimum 10 years
Skipped in the years 2015 and 2009


Again it shows that the market conditions for Pricol’s shares are not favorable as all the four critical criteria are not met.

A value investor need not undertake any further investigation and waste valuable time.

Still we do the review purely for academic purposes and comparison with the shares listed on our ‘Portfolio Y2K15’.


A. Company Performance

Profitability Analysis:


We present here in this brief company report five-year data as follows:

Mar'16
Mar'15
Mar'14
Mar'13
Mar'12
Net Sales
1126.51
949.66
891.15
873.89
964.94
Total Expenditure
1019.86
926.38
825.34
813.46
891.21
Operating Profit
106.65
23.29
65.81
60.44
73.73
EBITDA
113.65
25.29
69.44
61.95
75.88
EBITDA %
10.09%
2.66%
7.79%
7.09%
7.86%
Depreciation
34.17
35.26
30.66
31.95
29.19
Other Write-offs
0.00
0.00
0.00
0.00
0.00
EBIT
79.48
-9.96
38.77
30.00
46.69
Interest
9.31
7.89
6.52
16.33
29.79
EBT
70.17
-17.86
32.25
13.67
16.90
EBT %
6.23%
-1.88%
3.62%
1.56%
1.75%
Taxes
16.95
-4.54
16.89
-2.07
9.90
Profit and Loss for the Year
53.21
-13.32
15.37
15.74
7.00
Non Recurring Items
-10.02
-4.68
51.63
0.00
49.42
PAT
43.20
-18.00
67.00
15.74
56.42
PAT %
3.83%
-1.90%
7.52%
1.80%
5.85%


Highlights:
  • Very low and unhealthy EBDITA, EBT and PAT Margins;
  • Total Operating Expenses indicates quite an ordinary vulnerable business model;
  • Inconsistent performance with negative EBT margin in the year 2015;
  • Interest costs are not very high
On the profitability parameter the company’s performance is highly un-satisfactory the share shall be rejected.


 Balance Sheet Analysis:

Particulars  
(Rs. Crore/ Rs. 10 million)
Mar'16
Mar'15
Mar'14
Mar'13
Mar'12
Liabilities
12 Months
12 Months
12 Months
12 Months
12 Months
Share Capital
9.48
9.48
9.45
11.03
11.03
Reserves & Surplus
289.85
258.06
311.33
245.53
234
Net Worth
299.33
267.54
320.78
256.55
245.02
Secured Loan
33.33
20.01
33.94
50.26
76.76
Unsecured Loan
0
34
10
0
3.44
TOTAL LIABILITIES
332.66
321.55
364.73
306.81
325.23
Assets
Gross Block
451.21
447.1
493.55
502.78
491.14
(-) Acc. Depreciation
277.21
274.89
314.31
322.03
301.37
Net Block
174
172.22
179.25
180.75
189.77
Capital Work in Progress
6.45
3.85
1.73
2.6
1.54
Investments
95.65
52.97
60.38
38.8
30.24
Inventories
115.73
108.28
96.6
106.25
133.79
Sundry Debtors
200.19
164.47
158.97
163.96
180.09
Cash and Bank
6.47
6.76
3.78
2.21
68.47
Loans and Advances
38.46
50.62
82.04
74.51
72.78
Total Current Assets
360.85
330.14
341.39
346.93
455.13
Current Liabilities
265.29
220.08
205.91
250.83
324.33
Provisions
39.01
17.54
12.12
11.44
27.13
Total Current Liabilities
304.3
237.62
218.03
262.27
351.46
NET CURRENT ASSETS
56.56
92.52
123.36
84.66
103.67
Misc. Expenses
0
0
0
0
0
TOTAL ASSETS(A+B+C+D+E)
332.66
321.55
364.73
306.81
325.23
Current Ratio Actual
1.19
1.39
1.57
1.32
1.29
Quick Ratio
0.81
0.93
1.12
0.92
0.91
TOL/ TNW
1.13
1.09
0.82
1.22
1.76

Highlights:
  • Very low current and quick ratios (minimum required being 2 and 1 respectively) indicating weak liquidity position of the company.
  • TOL/ TNW being below 3 is satisfactory.
  • Low levels of debt is satisfactory.
Balance sheet analysis indicates an average performance and at the same time th nothing alarming.


Cash Flow Analysis:

Cash Flow
(Rs. Crore/ Rs. 10 million)
Particulars
Mar'16
Mar'15
Mar'14
Mar'13
Mar'12
Profit Before Tax
60.15
22.53
83.88
13.67
66.32
Net Cash Flow from Operating Activity
115.4
30.16
58.94
59.58
89.83
Net Cash Used in Investing Activity
-92
-31.72
4.67
-31.76
47.71
Net Cash Used in Financing Activity
-23.69
2.95
-62.04
-94.07
-78.38
Net Inc/Dec In Cash and Cash Equivalent
-0.29
1.39
1.57
-66.26
59.16
Cash and Cash Equivalent - Beginning of the Year
1.96
1.37
0.33
67.65
-3.83
Cash and Cash Equivalent - End of the Year
1.67
2.76
1.9
1.4
55.32


Highlights:
Company is generating positive but low net operating cash flows.

Cash Flow analysis reveals a very average  performance and nothing to boast about.



Dividend History:


Dividends Track Record
Announcement Date
Effective Date
Dividend Type
Dividend (%)
30/05/2016
11/08/2016
Final
100%
29/05/2014
30/07/2014
Final
40%
25/07/2013
06/08/2013
Interim
40%
29/05/2013
07/06/2013
Final
40%
29/05/2012
26/07/2012
Final
80%
31/05/2011
11/08/2011
Final
60%
31/05/2010
15/07/2010
Final
40%
30/05/2008
24/07/2008
Final
60%
30/05/2007
18/07/2007
Final
100%
29/05/2006
18/07/2006
Final
100%
24/05/2005
18/07/2005
Final
100%
22/05/2004
07/06/2004
Final
90%
27/05/2003
30/07/2003
Final
60%
21/05/2002
12/08/2002
Final
35%
31/05/2001
02/07/2001
Final
40%
29/03/2000
Interim
40%
28/05/1999
Final
30%
26/05/1998
Final
35%
20/05/1997
Final
35%

Highlights:
  • Company has skipped paying dividends in the years 2009 and 2015.
  • Even though the percentage of dividends declared appear to be handsome, the fact remains that the face value of the share being just Rs.1, the dividend per share is just Rs.1 or in paise. This combined with very high market price of Rs.110.60; the dividend yield is unacceptably low.
On this parameter the company’s performance is un-satisfactory.


Dividend Coverage from non-operating income


Dividend
0.00
6.28
2.99
6.03
Net Non-Operating Income
0
0
0
0
Dividend Coverage from Non-Operating Income
0
0
0
0

The company does not earn any non-operating income. This is a weakness as for paying dividends there is no back up or nothing to fall back upon other than operating profits. That’s why in 2015, when the company had incurred a loss, no dividend was paid.

On this parameter the company’s performance is highly un-satisfactory.




B.Market Condition:


Price to Earnings Ratio:
At the current market price of Rs.110.60 and Earnings Per Share (EPS) of Rs.4.56 (based on 2016 results) the PE Ratio is 24.26, well above the recommended 10.

The market condition as far is this parameter is concerned is not favorable.


Price to Book Value per Share:
With a book value of Rs.28.09 for the financial year 2015-16 and a price of Rs.110.6, the price to book ratio stands unfavorably well above the recommended maximum of 1.5, at 3.36.

On this parameter the market condition is unfavorable.


Dividend Yield:
We have already seen that Pricol Ltd., is not in a comfortable position to pay uninterrupted dividends. With a low pershare dividend of Rs.1 and a high market price of Rs.110.60, the dividend yield works out to a meager 0.90%
On this parameter the market condition is highly unfavorable.



Distance from 52 week high:
The 52-week high for this share is Rs.124.40 and the current market price is Rs.110.60. The distance to 52-weel high is Just Rs.13.80 or a mere 11.09% away from the 52 week high.

The market condition as far is this parameter is concerned is also not favorable.



Five year Returns:
The five-year return (return measured by change in share price) is 600%. Which means that today’s CMP of the scrip has already appreciated 6 times in the last five years and there is very little possibility for further upside and there is a great possibility that the price may fall steeply back to its five year low in case of a major market crash.

On this parameter the market condition is highly unfavorable.



C. Conclusion:

The company’s performance as well as the market conditions of the shares of Pricol Ltd. are clearly unfavorable and the share does not merit inclusion in any value investor’s portfolio.


Post Disclaimer: Opinions expressed here are the author’s personal opinions. Market conditions have a great bearing on many end results discussed in this report. No disrespect is intended towards the company, it’s management. Investors are advised not rely blindly on the opinions expressed herein but to exercise their own judgment. Neither the author nor the blog shall be responsible for any loss suffered by either acting or not acting based on the opinions expressed herein.