Saturday, May 10, 2014
Just imagine the financial picture of a micro cap company operating in capital goods sector which exclusively manufacturing products for sectors like Power,Refinery,Cement,Fertilizer ..etc. On the background of prolonged recession in user industries the company in your mind may be characterised by a bleeding balance sheet ,heavy promoter pledge or even a company referred to BIFR .Accepting , many companies in this sector going through such situations or worse . But let us look into a different story which is showing strong resilience in this tough time . Patels Airtemp (PAT) is the company which is doing exceptionally well in many parameters .Company is one of the leading producer of Heat exchangers,Pressure Vessels,Refrigeration and air conditioning equipments.PAT now mastered in the production of Air Cooled heat exchangers ,the product which is expected to replace the widely used water based heat exchangers in future.Company producing standard and custom made products and also offering turnkey solutions for large clients from the above mentioned industries.
The most attracting points of PAT is the resilience it showing in this tough times. Company’s close rival GEI Industrial Systems reported pathetic performance in recent times and going through a very difficult situation and even now it is not clear whether they can sail through the current recessionary period.GEI reported a huge loss in last FY where PAT survived due to better financial management,clean balance sheet and reasonably good order book position.In FY 2012-13 PAT reported a top-line of Rs.90 Cr ,net profit of Rs.5 Cr and an EPS of Rs.9.75 .Company never skipped dividend in last 7 year but steadily increasing the same over this period.At a time most of the small size companies operating in capital goods sector are struggling to service their debt ,PAT’s debt is very minimum which is below Rs.15 Cr.
Changes in promoters share holding is always taken as a benchmark for their confidence in their own company.Promoters of many small size companies - including its rival GEI Industrial Systems – pledged their shares in past few years due to various reasons like collateral for working capital availability ..etc .Many promoters are not in a position to pay back the amount and lost their shares due to pledge invocation .Here the story is different in the case of Patels Airtemp.Not a single share of this company is pledged and more than that promoters are very aggressively hiking their stake. As per rules, any promoter can hike only up to 5 % stake in any financial year through creeping acquisition route without making open offer. Promoters of PAT bought the entire 5 % in last financial year which increased their stake from 40 % to 45 % during 2013-14 .After completing the maximum permitted stake hike in last financial year ,promoters are again started buying from open market frequently when new financial year (2014-15) started. ( Verify Promoter Purchase details HERE) This clearly indicating their increasing confidence in the company even during this worst period for any company operating in capital goods space. In the 9 month period of ongoing FY ,company already reported an EPS over Rs.7 .
I believe ,the worst is over for this company and the credibility it kept even this tough period will surely increase its goodwill .Those who believe in a revival in India’s industrial growth ,this Gujarat based company is a risk-less proxy which is trading around half of its book value @ CMP of Rs.55.Stock listed only in BSE
Link to Company Website HERE
Disc: It is safe to assume that I have vested interest in PAT
Posted by VALUEPICK at 6:40 AM