This Pix v/s Balkrishna debate is meaningless. I am interested in Pix as a potential investment and I feel there is a tendency to overhype certain stocks.
Anyway what is more important to analyse is what are sustainable long term EBITDA margins of Pix.
Pre Covid EBITDA margins in FY19 and FY20 was 20%. It shot up to 30% in FY21 and was 26% in FY22. You will see this trend in a number of commodity processors- for example plastic pipe companies or rubber or faux rubber processors like Balkrishna and Pix.
This is because as raw material prices go up companies make inventory gains. Further, let say you mark up prices by 10% over cost. If commodity prices go up your cost goes up and so the same 10% will end up giving your higher EBITDA/kg of product sold.
Since August/ September most commodity prices are falling. So first you have inventory losses which compress margins and then 10% of cost will yield lower absolute EBITDA.
If you notice Pix quarterly numbers there is no EBITDA growth YoY since September 2021 quarter even though sales is growing YoY.
Subscribe To Our Free Newsletter |