I attended Premco FY24 AGM. Find enclosed my notes. Please note that there may be communication error from my side while taking down notes.
New Plant: Umbergaon plant Phase I commenced during the years. By end of CY2025, the plant would be fully operational. It would service Indian and export market. Peak sales can be achieved from the plant would be around Rs 50 Cr. New plant is expected to contribute around Rs 10 Cr sales during FY25.
Capacity utilisation: The peak utilisation company can operate is around 85-90%. In FY24, various plant (excluding Umbergaon) are around 70-75%. So for next 2-3 years, can service the market Existing and Umbergaon Capacity.
New Market/ Client: The company is at advance stage of discussion with European Client. Current inspection and approval process is at advance stage. At appropriate stage they would inform shareholders. They are present in North America/South America/Africa market beside India and Vietnam, Have limited presence in European market which intend to penetrate shortly. The large professional fees spent in forex is in order to get right skillset to support and get new clients. Also, company supplies almost all major players in Indian market, like Lux, Dollar, Rupa and Amul.
FY25
Forecast: The company intends FY25 sales to grow by 10%.Also, expect to manage margin at around 17% EBITDA. They are trying cost rationalisation efforts in all the plant which would result in saving of around 2%. That shall assist company to manage EBITDA margin in case cost escalate. With Umbergaon plant, the company can reach peak sales of Rs 120-140 Cr.
New product line: The company has new product like Leap tag, Recycled yarn-based elastic, Micro elastic. These products would continue to drive growth in revenue.
Competitors: Spica, Elastica, Bena Regal Tape and Kohinoor (not sure of name/spelling) are main competitor to the company
Share buyback: Limited time is available to complete formalities and hence would not be possible. However, may look at rewarding shareholder with dividend.
No plan to list on NSE.
My view
The management appear to be very conservative and performance is likely to see moderate growth despite great business and relationship. It has still not reached is peak valuation of Rs 900+, Sales and Profit achieved in FY22. So investor shall be patient to hold this investment in my view. While no clarity on growth in medium term, downside is also limited in my view due to dividend yield of 3% and free cashflow generating business model. Despite large capex (almost 40% of gross block), the company is very comfortable in in liquidity position with HDFC Bank (among the conservative banks) as lender. There are my current view and can change any time.
Disclosure: The company is my core equity holding with around 3.25% allocation. My view may be positively biased due to my investment. I may increase/decrease/exit from the company without informing the forum. I am not SEBI registered advisor. I am not suggesting any investment action.
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