Premco
Global Ltd is currently in its 29th year of operations.
The
company is one of India’s leading manufacturers of Elastic.
Specializing
in the manufacture of Woven and Knitted Elastic and non-Elastic Narrow Fabric
and Webbing Premco’s extensive product range caters to the apparel, lingerie,
sports-related, medical, footwear, luggage, furnishing, and automotive industries
The
company’s customer’s include brands/companies
such as The GAP / Old Navy, Sara Lee, Fruit of the Loom, Target Stores,
Walmart and many others.
In
addition to a vast stock product line, Premco specializes in narrow fabric for
custom-specific applications. Color, design, dimension, material and
performance are made the way customer wants.
Product
showcase link:
http://www.premcoglobal.com/showcase.html
Number
of employees: 168 ( as of March 31, 2012)
Manufacturing
units : 4 ( Dadra, Palghar, Vapi, Mumbai). Dadra contribution to revenue is
maximum at about 55%, followed by Vapi & Palghar. Mumbai manufacturing
operations are minimal.
Promoter
holding : 59.64% ( Harjani family)
Financials:
Equity
Capital: Rs.3.01 cr
Debt
: Rs.7.87 cr ( 5.88 cr-long term + 1.99 cr short term) as of Sept 30,2012
Market
price: Rs.31.3
Market
Cap: Rs.10.3 cr
Year
ended March 31, 2012
Revenue:
Rs.33.77 cr
EBIDTA:
Rs.3.15 cr
PAT:
0.61 cr
EPS:
Rs.2
Dividend
per share: Rs.1.20 ( 12%)
6-months
ended Sept 30, 2012:
Revenue:
Rs.28.58 cr
EBIDTA:
Rs.4.15 cr
PAT:
2.09 cr
Key
highlights:
1)
EPS / Dividend history for the last
10 years:
Year
|
EPS ( Rs.)
|
Dividend
per share (Rs.)
|
Payout
ratio %
|
2002-03
|
1.91
|
Nil
|
0
|
2003-04
|
2.40
|
Nil
|
0
|
2004-05
|
2.72
|
Nil
|
0
|
2005-06
|
2.30
|
Nil
|
0
|
2006-07
|
2.57
|
0.80
|
31.12
|
2007-08
|
1.54
|
1.20
|
77.92
|
2008-09
|
4.61
|
1.20
|
26
|
2009-10
|
3.47
|
1.20
|
34.58
|
2010-11
|
4.46
|
1.20
|
26.9
|
2011-12
|
2.01
|
1.20
|
59.7
|
Paid
up equity capital was Rs.2.97 cr till 2007-08 and thereafter is Rs.3.01 cr.
The
dividend pay out ratio might appear irrational, but importantly from an investor’s perspective,
they have maintained the dividend at 12% over the last 5 years.
2) Realization per metre of elastic tape:
2009-10: Rs .4.85 ( 538 lakh
metres sold)
2010-11: Rs.5.35 ( 702 lakhmetres
sold)
2011-12: Rs.6.47 ( 505 lakh metres
sold)
3) Installed capacity : 1110 sq
metres in 2010-11 from 850 sq metres in 2009-10
4) About 50% of revenue comes
through exports.
5) Key raw materials are
polyester, nylon, rubber & spandex.
6) In 2010-11, the company had
initiated a capacity increase plan which has got completed in the next year.
Gross block increased by about 4cr mainly through investment in plant and machinery.
A little about the Elastic Narrow Fabrics Industry:
1) Elastic narrow fabrics are an important input to the
undergarment industry. They are also used in other garments i.e. shorts,
jackets and skirts, moulded luggage, baby diapers, sports goods, medical goods,
etc.
2) Product characteristics
Elastic narrow fabrics are made from an elastomeric yarn and yarns made from cotton, polyester and nylon. More than 3000 different varieties of elastic fabrics are manufactured however, based on manufacturing technology they can be classified as woven and knitted. The fabric is expected to have the following properties:-
Elastic narrow fabrics are made from an elastomeric yarn and yarns made from cotton, polyester and nylon. More than 3000 different varieties of elastic fabrics are manufactured however, based on manufacturing technology they can be classified as woven and knitted. The fabric is expected to have the following properties:-
3) Market dynamics and key growth drivers
Elastic narrow fabrics are majorly consumed in inner wears.
Undergarments account for 80 - 85% of the consumption of elastic fabrics.
Elastic narrow fabrics are majorly consumed in inner wears.
Undergarments account for 80 - 85% of the consumption of elastic fabrics.
4) On an average
each undergarment consumes 0.83 meters of elastic. The average price of elastic
narrow fabric is Rs. 4.5 to 6.5 per meter.
5) Current Market size and future potential
The Indian innerwear market has grown at a GAGR of about 14.5% between 2006 & 2011. The growth in the average selling price in the super premium category . Interestingly, Page Industries Ltd ( of the Jockey fame) has expanded its woven elastic capacity to 2.9 cr metres / year and knitted elastic capacity to 1.4 cr metres/ year.
The Indian innerwear market has grown at a GAGR of about 14.5% between 2006 & 2011. The growth in the average selling price in the super premium category . Interestingly, Page Industries Ltd ( of the Jockey fame) has expanded its woven elastic capacity to 2.9 cr metres / year and knitted elastic capacity to 1.4 cr metres/ year.
The Innerwear market in India is currently expected to
be about Rs.15,000 cr/ year and expected to grow to about Rs.43,700 cr/year by
2020 growing at a CAGR of 13% outpacing the growth of the overall apparel
market. The market is growing, largely driven by premiumization.
All the major international Innerwear brands have
commenced operations in India.
@ Current market price of about Rs.31-32, Premco Global
provides a good entry point for investors with a 2 plus year investment
horizon. The innerwear market is tilting towards premium / super premium
products and this shall stand Premco Global in good stead.Overall,a good direct
proxy-play on the Innerwear market.