Steel Segment Major Contributor:
The Steel Products comprises of Cold Rolled Steel Strips which includes special
steels, Cold Rolled Formed Sections used for building products, infrastructure and
auto profiles, road safety systems and sheet piles. Currently, this is the largest
segment in terms of revenues (50%) and operates four plants. The Steel Products
Unit (SBU) services some of the major customers in the industry such as Lloyds Insulation
Ltd, Alstom Projects India Ltd, Lanco Infratech India Ltd., FL Smidth, Thermax,
Johnson Lifts, Adani Power, VECV, L&T, Ashok Leyland and many others. The total
market potential is Rs 6300 crores and company enjoys a market share of 8 – 10 %.
Current Capacity is 1680000 MTPA with utilization levels of 60% - 65 %. Company
is expecting stable growth in these segments for next two years.
The business of Industrial components for the company consists of Hydraulic Cylinders,
Press Metal components for Automotive and White Goods. The products offered includes
A/C compressor shells, 4 wheeler parts such as car seating system assembly, parts
for two wheelers such as disc brakes, and parts for heavy vehicle filters. Major
clientele for this SBU includes some leading companies like Tecumseh products, Emerson
Climate Technologies, Endurance Technologies, India Nippon Electricals, IFB Automotive
Pvt. Ltd, Fleetguard Filters, Wabco India, Brakes India etc. South India contributes
55% to this SBU’s business, whereas rest ~45% comes from West India. The addressable
market size of Industrial Components business is estimated to be over Rs 5000 crores
with market share of 2%. Hence there is a lot of scope for growth in this industry.
Tubes division manufactures (1) Electric Resistance Welded (ERW) pipes, (2) Cold
Drawn Welded (CDW) tubes, (3) Air Pre-heater (APH) tubes, and (4) Indian Boiler
Regulations (IBR) tubes. This division caters to Automobile, Power, Manufacturing,
Structural & General Engineering and several others. The segment has major presence
in Tamil Nadu, Karnataka and Maharashtra. The key clients in this segment are Mahindra,
Volvo- Eicher commercial vehicles, Hyundai, TVS, Tata Motors, Ashok Leyland, Thermax,
BGR, Paharpur, Cethar, KCP, Forbes Marshall, JSW, LMW and Airco Fin. Company is
continuously focusing on this segment as it constitutes high margin products, also
they are market leader with 7000 tonnes/month capacity with capacity utilization
of 85%. The Company expects strong 20% revenue growth led by 60% growth from CDW
business (on account of brown field expansion). Export is likely to contribute improve
its share in overall volume during FY15.
The good part is that the company does not have significant long term debt (D/E
Ratio of 0.40x). All the debt is working capital related. Hence even if economic
recovery is delayed due to whatsoever reason it will not hurt the company too much.
On the contrary in case of faster economic recovery the company is well equipped
to benefit from the same.
Diversified its product Portfolio:
Pennar industries Ltd is one of the leading engineering company in India, They are
diversifying itself from a steel manufacturer to a value added steel and pre-engineered
steel buildings manufacturer. The company is on track in terms of foraying into
newer verticals and acquisition of new customers. Pennar has forayed into Hydraulic
business (plant will commission from Chennai facility by mid March 2014), Warehousing
solution, Solar projects and focus on launching water treatment projects, in addition
to expanding tube capacity and change in product mix by increasing the contribution
of railway coaches compared to wagons (with the high visibility in the demand for
coach compared to wagons).
Systems and Project:
Systems and Projects unit includes three business segments 1) Solar module mounting
structure 2) Railway Wagons and Coaches and 3) Storage Solutions. Company has 35%
market share in Solar business. Companies main clients for solar includes L&T,
Tata power solar, Navalakha, Lanco Solar, ABB, Scneider Electric solaris. In railway
segment company mainly serves to Integral Coach Factory, Southern railways, Texmaco,
Besco. Execution in railways has become very fast as they use specific machine for
the same. Opportunity to scale up in railway segment is very high as there is only
6 months lag period for real execution. After recent MOU signed with china there
is lots of scope for upgradation and improvement in facilities and services. Company
will be the major beneficial from future updation of railway facilities as company
is one of the leaders in this segment.
Pre-Engineered Building Systems:
Pennar Engineered Building Systems Ltd (PBSL) is a subsidiary of Pennar Industries
Ltd. PEBSL provides design, manufacture, supply and installation of custom designed
metal buildings, Building components and structural steels. PEBSL also provides
structural EPC solutions for solar power plants. Company has market share of 7%
with strong EBIDTA margins of 12% in this segment. Some of the prominent clients
that the company has worked with include Ultratech Cements, L&T, HCC, P&G,
Godrej, Dr Reddy’s Lab, ABB, JSW, Scheneider Electric, Reliance Infocom, ACC, Volvo
etc. To achieve high growth in business; PEBSL has aggressive growth plans in international
emerging markets, solar infrastructure, high rise commercial buildings and cold
form building systems.