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Home Pix Transmission – Multibagger Stock For the Month of February 2019

Pix Transmission – Multibagger Stock For the Month of February 2019

Price – Rs. 203.00

View – Buy

About the Company

Pix Transmission Limited (“Pix Transmission” or the “Company”) is engaged in the business of manufacturing of belts and related mechanical power transmission products.

The Company specializes in Rubber V Belts that are used in several industrial, agriculture and automotive applications. Its products include powerware pulleys, couplings, and bespoke; and transmission belts for industrial, agricultural, lawn and garden, automotive, and special application.

The Company is headquartered in Nagpur, India. The Company has overseas subsidiary operations in Europe and Middle East, in addition to over 250 committed channel partners in over 100 countries.

Product Range

Pix Transmission

Financial Position

Particulars

FY14

FY15

FY16

FY17

FY18

Revenue (In Rs. Cr.)

206.92

219.24

234.20

251.55

264.86

Growth

5.95%

6.82%

7.41%

5.29%

EBITDA (In Rs. Cr.)

31.89

35.77

36.29

46.31

56.19

EBITDA Margin

15.41%

16.32%

15.50%

18.41%

21.21%

EBIT (In Rs. Cr.)

18.37

22.96

23.25

32.95

41.52

EBIT Margin

8.88%

10.47%

9.93%

13.10%

15.68%

PBT (In Rs. Cr.)

6.56

6.49

9.74

24.48

33.88

PAT (In Rs. Cr.)

7.52

3.91

6.54

16.25

22.56

PAT Margin

3.63%

1.78%

2.79%

6.46%

8.52%

EPS (In Rs.)

5.52

2.87

4.80

11.93

16.56

EPS Growth Rate

-48%

67%

148%

38.8%

Historic P/E (Closing Price of 31st March)

6.16

16.87

10.31

11.06

7.35

CURRENT P/E (based on price of 7th February – Rs. 204.25)

9.43

Shareholder funds (In Rs. Cr.)

148.14

149.56

151.48

170.53

188.99

Minority Interest (In Rs. Cr.)

-0.14

0.00

0.00

0.00

0.00

Debt (In Rs. Cr.)

117.79

134.43

125.33

128.00

104.67

Cash (In Rs. Cr.)

19.52

15.88

23.66

16.96

10.04

D/E

0.80

0.90

0.83

0.75

0.55

Interest Coverage

2.06

1.87

2.17

3.20

4.32

ROCE

6.91%

8.08%

8.40%

11.04%

14.14%

ROE

4.43%

4.34%

6.43%

14.36%

17.93%

 

Quarterly Results

Q2 FY 2018

Q3 FY 2018

Q4 FY 2018

Q1 FY 2019

Q2 FY 2019

TTM

Q-o-Q %

Y-o-Y %

Revenue (In Rs. Cr.)

54.77

67.11

79.82

69.21

72.13

288.27

4.22%

31.70%

EBITDA (In Rs. Cr.)

13.28

14.05

17.99

15.79

11.19

59.02

-29.13%

-15.74%

EBITDA Margin

24.25%

20.94%

22.54%

22.81%

15.51%

 

PAT (In Rs. Cr.)

6.66

3.43

10.27

10.75

6.11

30.56

-43.16%

-8.26%

PAT Margin

12.16%

5.11%

12.87%

15.53%

8.47%

 

EPS (Rs.)

5.20

1.75

7.54

7.89

4.49

21.67

-43.09%

-13.65%

Peer Comparison

WHAT’S DRIVING THE STOCK?

Established Distribution Network Catering To Various Segments

Pix Transmission is a well-established player in the V-belt industry catering to various segments such as industrial, agricultural, automobile etc. The Company derives around 50% of its revenues from domestic and remaining from export market. Over the years, the Company has developed a strong distribution network as it has presence in around 100 countries with a network of around 250 channel partners.

Presence of the Company’s products in both industrial and automotive segments mitigates the risk from slowdown in any one segment.

Consistent Growth In Revenues Coupled With Improvement In Margins

During FY 2016-FY 2018 period, Pix Transmission has exhibited growth in the total operating income at a CAGR of 6.80%. Further, during FY 2018, the Company registered around 5.29% growth in total operating income. This is owing to improved demand in the industrial, agriculture and auto industries which are the main end user segments of the products manufactured by the Company.

During FY 2018, the operating margin improved to 21.21% as compared to 15.5% in FY 2016 due to cost optimization measures initiated by the Company. Besides, during H1 FY 2019 (April – Sept), the Company reported increase in total operating income by around 40% on a y-o-y basis owing to better demand for its products. The profit margins of the Company further improved as a result of better economies of scale.

Comfortable Financial Risk Profile

The overall capital structure of Pix Transmission is considered to be comfortable at 0.55x as at March 31, 2018 as compared to 0.75x as on March 31st 2017 due to accretion to reserves and repayment of term loans. Further, the Company has comfortable liquidity position with cash and bank balance at Rs.10.04 Cr. as on March 31, 2018 and Rs.13.42 Cr. as on Sept 30, 2018.

Reasonable Valuation

Available at PEG ratio of 0.19x and P/E of 8.21x (5 years average P/E is 10.35x).

WHAT’S DRAGGING THE STOCK?

Negligible Institutional Holding.

Low Equity Base | Low/ Volatile Volume.

Exposure To Raw Material Price Fluctuations

Rubber and Rayon are the key raw materials for manufacturing of rubber V-belts constituting majority of total raw material purchases of the Company. The prices of these commodities remain volatile depending upon demand supply situation.

Foreign Exchange Risk – Pix Transmission generate 50% of its revenue from exports.

About the Author

Rajat Sharma pictureRajat Sharma is a well known stock market analyst and commentator. He has covered Indian markets for over a decade and is regarded for consistently identifying early stage investment opportunities. Attorney by qualification, Rajat has done extensive work for improving corporate governance and disclosure standards.