Premier Explosives (Short Term Delivery)

Buy Premier Explosives (BSE: 526247) @ CMP for short term delivery

Reasons for Investment

Business Profile:-
Premier Explosives (PEL) was incorporated initially as a private limited company in the year 1980. The company later got converted into a public limited company in the year 1987. Premier Explosives manufactures an entire range of explosives and accessories for the civil requirements. The company`s R&D facility is recognised by the Council for Scientific and Industrial Research (CSIR), Government of India, as an established research centre. It is also recognised as a research base for Ph.D. work by the Osmania University, Andhra Pradesh. The company also has a mushroom division at Medchal, near Hyderabad. (which it has sold this year for around about 18 crores)

Financials
The company registered a net sales of Rs 683.92 million for the financial year 2006 as compared to Rs 587.68 million in the previous year. The company registered a net profit of Rs 30.71 million in the financial year 2006 as compared to Rs 24.92 million in the previous year. During the third quarter of the financial year 2007, the company generated sales of Rs 159.26 million as compared to 169.26 million in the same period last year and the net profit stood at Rs 7.94 million as compared to Rs 5.08 million in the third quarter of the financial year 2006. The company reported a phenomenal jump in net profit for the quarter ended June 2007. During the quarter, the company rose 2.42 times to Rs 32.38 million, from Rs 13.39 million in the same quarter, last year

Factors which makes the stock a MUST BUY
The company is focussing entirely on defence deals at the moment (where payments are late, but the margins are very very high). The newly inducted Independent Director of the company Mr. P R Tripathi is a Mining Engineer and former Chairman & Managing Director of National Mineral Development Corporation Ltd. With his influence in the top companies like GMDC, Coal India Ltd etc, the company is expected to get many bulk orders. (I am expecting a bulk order announcement in the coming days).Apart from that the company has streamlined and revamped its management recently which has started showing in terms of increase in efficiency. As per a news article published in a business daily few months back the company is manufacturing entire range of defence equipments including Missile Fuels. It is also being known that the company is already planning to double its capacity for Missile Fuel production. It has already got some contracts for supplying missile fuels which will definitly have a positive impact on the coming quarters results. The company hs also bought 150 acres of land near Hyderabad and is expected to strike another land deal in the coming days to help its capacity expansion plans. The promoters of the company have marginally increased their stakes in the company in the last quarter. The company also has 2 overseas joint ventures in Georgia and Turkey, the benefits from which are to be seen in the upcoming results.
Defence is a sector in which demand is always at premium the only concern is whether the company can supply the required order or not. And with the capaciy expansions and revamped management premier Explosives is all set to make it count big. It is trading cheaply as per the valuations and hence the risk factor is very less.Book Value: Rs.22.02EPS: Rs.3.24Market Cap: Rs.41.78 CrP/E: 15.89Dividend: 15%Dividend yield: 2.92 %Return on Net worth: 14.7AND CURRENT MARKET PRICE Rs 50??... looks very cheap even comparing to its closest competitors the stock should be trading in the range of 90++ on a very conservative basis.
I feel that it is a Least Risk Investment with very limited downside. Its 52 week low is Rs 34 and high is Rs 66. The script has consolidated for the past one year at around Rs 50. As per the charts it is on the verge of a breakout and can move up anytime.
Hence forth I feel it is a real hiden gem @ CMP.. and one should have it in there portfolio for a 90 day view for a tgt of 90++
(Due to volatile market conditions and political issues governing the markets as of now, I would advice a stop loss of around Rs 45 for very short term Investors, long term holders can buy and hold)
Happy Investing
Investomaniac
Jai Dadi Ki