In the trading week from August 8-9, defence PSU stocks like BEL, HAL and BDL recovered their previous losses and ended with weekly gains of 4-7%. However, this was not the case with a smallcap defence stock that had earlier carried a 1:10 stock split for its investors. This small-caps dipped by over 10% despite the bullish trend in the defence basket. It is none other than Premier Explosives.
Premier Explosives Share Price:
This defence stock ended at Rs 584.85 apiece, down by 1.32% on BSE after market hours of August 9, with a market cap of Rs 3,144.22 crore. But the stock was around Rs 650 levels on August 5th, the start of the week's trading session.
Accordingly, Premier Explosives stock dipped by over 10% on BSE. YTD, however, the stock is up by 87.5%.
The stock's 52-week high and low is at Rs 909.35 apiece and Rs 195.04 apiece respectively. However, its PE ratio is high at 111.81x, while the return on equity is healthy at 12.77%.
Premier Explosives Credit Rating:
The stock dipped despite ICRA reaffirming its ratings on Premier Explosives taking into account the company's healthy order book position.
It said, "The reaffirmation of the ratings takes into account a healthy order book position of Premier Explosives Limited (PEL) as of June 30, 2024, providing near to medium-term revenue visibility. The company had an outstanding order book of ~Rs. 899 crore as on June 30, 2024. Further, the majority of this order book (~85%) is from the margin-accretive defence segment. The robust order book and a favourable demand outlook for the defence segment are expected to result in a healthy growth in the company's scale of operations in the near to medium term."
According to ICRA's note, there has been a significant improvement in PEL's operating profit in FY2024, driven by increasing revenue contribution from the high-margin defence segment. While the operating profit is expected to be healthy in the near to medium term, supported by the execution of margin-accretive defence orders. However, the likely levy of liquidated damages (LD) to impact the profitability.
The ratings are constrained by the high working capital intensity owing to the long receivable cycle of the defence segment, which can stretch up to three to six months. The ratings also consider the vulnerability of the commercial explosive segment's profitability to the volatility in raw material prices as the pass-through may be with lag amid intense pricing competition. Further, the customer concentration remains high for PEL, it said.
ICRA also notes the highly regulated nature of the explosives manufacturing industry with the need for licensing for various products. Therefore, the company's operations remain vulnerable to any changes in the regulatory framework.
Premier Explosives Stock Split:
The company's stock turned ex-split for sub-division in the ratio of 5:1. Meaning, 1 existing equity share of Premier Explosives with a face value of Rs 10 each, will be subdivided into 5 smaller equity shares with a face value of Rs 2 each. The record date to determine eligible shareholders for the stock split is fixed on June 21.
About Premier Explosives:
PEL has the widest range of products and technologies in the manufacture of Explosives & Accessories. These include Emulsion and Slurry explosives, LD cartridge explosives, Bulk Explosives, Small-dia non-permitted explosives, Permitted explosives, Cast Boosters, Pillow-packs for secondary blasting; Detonating Fuse of various core-loads, Plain detonators, Instantaneous Electric Detonators, Electric Delay Detonators, Permitted Detonators, Cord Relays and Amardet NoN-Electric Shock-tube Detonators.
Click it and Unblock the Notifications
Sign in with Google