This post has been written by Himanshu Shah for FinMedium Research Desk. Follow him on Twitter.
Precision Wires – Company Overview
Precision Wires India Limited (PWIL) was set up in 1989 for the manufacture of Enamelled Copper Winding Wires. It was promoted by erstwhile Atlas Wires Limited (AWL), Mahendra Mehta, Deepak Mehta, and Milan Mehta.
Precision Wires is one of the few companies in India with the capacity, capability, and mind-set to cater to the unique demands of customers in the electrical industry across the world.
It is the largest producer of Winding Wires in South Asia with an installed capacity of over 35000 MT/year being increased to about 45000 MT/year by 2019.
PWIL has a global presence in 18 countries in the world. Over the years, the company’s wires have been synonymous with the very best in quality, reliability, and integrity.
Thus, with long history and expertise in the industry has enabled us to develop long term associations with the top manufacturers across applications, such as motors, transformers, generators, compressors, automobiles, hand tools, fans, relays, ballasts, etc.
PWIL is a Small Cap Category Company with a market cap of around 350 crores.
Product Portfolio of Precision Wires
Precision Wires India Limited (PWIL) is the largest manufacturer of Enamelled Copper Winding Wires in India. Company’s Product includes the following
Enameled Round Winding Wires
Enamelled Round Copper Wires are used in electrical machines such as motors, generators, transformers, household appliances, auto-electrical, refrigeration (hermetic) motors, electrical hand tools, fans, switchgear, coils & relays, ballasts, and more, mainly in low voltage applications.
Enameled Rectangular Winding Wires
Enamelled Rectangular Copper Wires are used in low and medium voltage electrical machines such as motors, generators, and transformers. The cross-section of these wires ranges from 3.0 to 75.0 square millimeters with an insulation Class ranging from 105 to 220 degrees Celsius.
Continuously Transposed Conductors
Continuously Transposed Conductors are used in Large Power Transformers, generally more than 50 MVA, Furnace Transformers, and Traction Locomotive Transformers.
The current production range of CTC is between 5 to 72 strands with a variety of different insulating materials.
Paper Insulated Copper Conductor
Rectangular Taped Conductors of various types are used as winding wires in a variety of high voltage applications such as Oil-filled Power and Distribution Transformers, Dry Type Transformers, High Tension Motors/Generators, and Traction Equipment.
Recent Business Performance
| QUARTERLY RESULTS (rs in Crores) | YoY | QoQ | |
| Particulars | Sep-20 | Sep-19 | Jun-20 |
| Net Sales | 393 | 369 | 153 |
| Operating Expenses | 373 | 352 | 148 |
| Operating Profit | 19.48 | 17.5 | 5.08 |
| Interest | 2.54 | 4.45 | 2.4 |
| Depreciation and Amortization | 3.8 | 3.96 | 3.79 |
| Profit Before Tax | 13.15 | 9.1 | -1.1 |
| Tax | 3.14 | 0.91 | -0.11 |
| Net Profit | 10.01 | 8.19 | -1 |
| Diluted EPS | 4.33 | 3.54 | -0.43 |
| Operating Profit Margin | 4.96 | 4.74 | 3.32 |
| Net Profit Margin | 2.55 | 2.22 | -0.65 |
The company’s business performance improved substantially in September Quarter as compared to June Quarter after covid impact and also growth seen in revenue from Sept 2019(YoY). Its detailed analysis is as under :
The company’s sales increased by 6.5% YoY and 156% QoQ which led to increase in operating profit by 11.31% YoY and 283% QoQ.
The company’s interest cost reduced QoQ and YoY from 2.4 and 4.45 crores to 2.54 crores.
The company’s Net Profit increased YoY by 22% from 8.19 crores to 10.01 crores.
The company’s Operating Profit Margin increased QoQ and YoY from 3.32% and 4.74% to 4.96%.
The company’s Net Profit Margin also increased YoY from 2.22% to 2.55%.
Company’s EPS increased YoY from 3.54 to 4.33 rs.
Financial Analysis of Precision Wires
Balance Sheet of Precision Wires India Limited (in Crores)
| Particulars | 31/3/2017 | 31/3/2018 | 31/3/2019 | 31/3/2020 |
| Non Current Assets | 88.32 | 90.89 | 124.86 | 120.39 |
| Net Block | 81.81 | 79.04 | 113 | 115 |
| Capital Work in Progress | 5.18 | 10.43 | 10.38 | 3.91 |
| Long Term Investments | 1.33 | 1.42 | 1.48 | 1.48 |
| Current Assets | 314 | 437 | 464 | 423 |
| Inventory | 107 | 108 | 123 | 107 |
| Accounts Receivable | 181 | 254 | 295 | 269 |
| Cash & Bank Balances | 15.2 | 61.34 | 34.06 | 38.38 |
| Total Assets | 403 | 529 | 590 | 544 |
| Liabilities | 403 | 529 | 590 | 544 |
| Shareholders Funds | 213 | 237 | 265 | 283 |
| Share Capital | 11.56 | 11.56 | 11.56 | 11.56 |
| Reserves | 201 | 225 | 254 | 271 |
| Non Current Liabilities | 5.78 | 5.24 | 22.81 | 17.94 |
| Secured Loans | 16.48 | 11.98 | ||
| Current Liabilities | 185 | 287 | 302 | 243 |
| Accounts Payable | 125 | 240 | 267 | 203 |
| Short Term Loans | 37.8 | 33.43 | 13.01 | 19.05 |
| Total Liabilities | 403 | 529 | 590 | 544 |
Profit & Loss Statement of Precision Wires India Limited (in Crores)
| Particulars | 2016-17 | 2017-18 | 2018-19 | 2019-20 |
| Sales | 884 | 1,408 | 1,758 | 1,526 |
| Operating Expenses | 831 | 1,323 | 1,665 | 1,453 |
| Operating Profit | 53.08 | 85.32 | 92.87 | 72.69 |
| Other Income | 2.93 | 2.05 | 1.65 | 4.12 |
| Depreciation Expense | 14.29 | 14.07 | 12.79 | 16.1 |
| Interest | 9.23 | 15.2 | 17.12 | 19.03 |
| Profit Before Tax | 32.49 | 58.09 | 64.62 | 41.68 |
| Tax | 10.39 | 22.11 | 22.79 | 9.85 |
| Net Profit | 22.1 | 35.98 | 41.47 | 31.32 |
Company’s Sales increased during year 2017 to 2020 from 884 crores to 1526 crores at a CAGR of 20%.
Company’s Net Profit increased during year 2017 to 2020 from 22.1 crores to 31.32 crores at a CAGR of 12%
Company’s Interest Cost increased from 9.23 crores in year 2017 to 19.03 crores in year 2020.
Company’s Operating Profit Margin declined from 6% in year 2017 to 4.76% in year 2020.
Company’s Net Profit Margin declined from 2.5% in year 2017 to 2.05% in year 2020.
Cash Flow Statement of Precision Wires India Limited (in Crores)
| Particulars | 31/3/2017 | 31/3/2018 | 31/3/2019 | 31/3/2020 |
| Cash from Operating Activity(CFO) | 13.09 | 94.97 | 58.87 | 48.32 |
| Cash from Investing Activity | -8.86 | -17.49 | -46.71 | -12.96 |
| Cash from Financing Activity | -6.18 | -31.4 | -39.5 | -31.12 |
| Net Cash Flow | -1.96 | 46.08 | -27.34 | 4.25 |
| Net Capex (est) | 9.33 | 15.75 | 45.69 | 12.04 |
| Free Cash Flow (est) | 3.76 | 79.21 | 13.18 | 36.28 |
The company’s Cash Flow from Operations(CFO) has remained inconsistent during the last 4 years.CFO increased to 94.97 crores in the year 2018 from 13.09 crores in the year 2017.
While CFO decreased after that in the years 2019 and 2020 to 58.87 crores and 48.32 crores.
The Company’s Cash Flow from Operations increased from 13.09 crores to 48.32 crores at a CAGR of 39%.
Ratio Analysis
| Particulars | 2016-17 | 2017-18 | 2018-19 | 2019-20 |
| Profitability Ratios | ||||
| Operarting Profit Margin (%) | 6.33 | 6.21 | 5.38 | 5.03 |
| Net Profit Margin (%) | 2.5 | 2.56 | 2.36 | 2.05 |
| ROCE (%) | 19.09 | 30.32 | 28.36 | 20.19 |
| Return on Assets (%) | 5.48 | 6.81 | 7.03 | 5.76 |
| ROIC (%) | 13.12 | 24.77 | 20.63 | 16.59 |
| ROE (%) | 10.39 | 15.21 | 15.62 | 11.07 |
| Reported EPS | 9.56 | 15.56 | 18.09 | 13.76 |
| Operational Ratios | ||||
| Quick Ratio | 1.12 | 1.15 | 1.13 | 1.3 |
| Current Ratio | 1.7 | 1.52 | 1.54 | 1.74 |
| Interest Coverage Ratio | 4.52 | 4.82 | 4.77 | 3.19 |
| Asset Turnover Ratio | 2.19 | 2.66 | 2.98 | 2.8 |
| Cash Conversion Cycle | 41.93 | 19.66 | 11.22 | 19.68 |
| Debt to Equity Ratio | 0.18 | 0.14 | 0.11 | 0.11 |
| Free Cash Flow/Sales (%) | 0.43 | 5.63 | 0.75 | 2.38 |
| Valuation Ratios | ||||
| P/E | 12.07 | 17.45 | 11.08 | 4.85 |
| Price to Book | 1.25 | 2.65 | 1.75 | 0.55 |
| EV/EBITDA | 5.17 | 6.87 | 4.85 | 1.91 |
| Dividend Yield (%) | 3.03 | 1.66 | 2.25 | 3.75 |
Company’s Operating Profit Margin and Net Profit Margin has decreased over last 4 years.
Company’s ROCE decreased from 28.36% to 20.19% during FY 2018-19 to FY 2019-20.
Company’s ROE also decreased from 15.62% to 11.07% during FY 2018-19 to FY 2019-20.
Company’s Quick Ratio and Current Ratio have remained stable during last 4 years.
Company’s Interest Coverage Ratio has decreased from 4.52 to 3.19 during last 4 years.
Company’s Cash Conversion Cycle has improved in last years and has came down from 42 days to 20 days in last 4 years.
Company’s Debt to Equity Ratio is 0.11 which is very negligible and considered good.
Company’s PE Ratio as per march 2020 is showing as 4.85 which is due to correction in the markets due to Covid effect which led to substantial drop in it’s Share price.
As per TTM EPS of 10.61, it’s PE ratio comes to around 14.
(Source: Moneycontrol)
Similarly, while Company’s Price to book ratio as per march 2020 is 0.55, while as per recent share price and book value, price to book value comes to around 1.24 (Source: Moneycontrol)
Peer Comparison
Business
| Precision Wires India Limited | Universal Cables | Vindhya Telelinks |
| Insulated Enamelled Wires | Electrical cables 85% | EPC 69.86% |
| And Other Insulated Electric Conductors 100% | ||
| Associated Equipment’s, Cable Accessories, etc. | ||
| Installation, maintenance and repair services 7 % | Cables 30.14 % | |
| Others 1 % |
Ratio Comparison of last 5 years with peers
| Particulars | Precision Wires India Limited | Universal Cables | Vindhya Telelinks |
| 5yr Average Net Profit Margin | 2.30% | 7.74% | 12.71% |
| 5yr Average Cash Conversion Cycle | 26.08 | 120.16 | 138.39 |
| Contingent Liabilities vs Profit | 0.7 | 0.35 | 1.37 |
| 5yr Average Debt to Equity | 0.14 | 0.54 | 0.37 |
| 5yr Net Profit (CAGR) | 20.75% | 6.32% | 21.29% |
| P/E | 14.81 | 10.89 | 4.31 |
| 5yr Average Operating Profit Margin | 5.86% | 11.30% | 16.95% |
| 5yr Average ROCE | 23.35% | 11.13% | 13.81% |
| 5yr Average Other Income vs Net Profit | 0.09 | 0.13 | 0.17 |
| Sales vs Receivables | 10.24 | 11.07 | 12.4 |
| 5yr Average ROE | 12.21% | 10.74% | 11.62% |
| 5yr Average Return on Assets | 0.00% | 0.00% | 0.00% |
Note: Though Precision Wires India Limited, Universal Cable, and Vindhya Telelinks are in the same sector, their product mix is different as showing in the previous table, so the above-operating profit and net profit margin may not be directly comparable due to the different product mix of peer companies.
Also Watch: Precision Wires – A Good Stock in Troubled Industry?
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This post has been written by Himanshu Shah for FinMedium Research Desk. Follow him on Twitter.
Cover Image: Official Website
