Premier Explosives in strategic radar

CMP: Rs.41.50

[An old news but has got lot of weight]

Some fund managers have started taking a serious look at the Premier Explosives counter. According to market circles, the stock, which had attracted lukewarm interest from the domestic and overseas institutions in the recent years, has come under research focus for a number of fund houses because of change in its business dynamics. The company, one of the three in the country manufacturing the entire range of explosives and accessories for the civil/industrial requirement, is poised to become a defence/strategic industry supplier through capacity expansion, including missile fuel. Premier would supply the fuel at a higher than normal margin and an undisclosed quantity to Satish Dhawan Space Centre, Sriharikota (SHAR). It also obtained a 10-year Rs 7 crore per annum renewable O&M contract from SHAR for its second propellant plant. (The margins for the defence deals are very high and this is reflected in the December, 2007 results when the net profits almost remained the same inspite of the sell of the mushroom division and clocking less net turnover). Mr A.N. Gupta, Vice-Chairman and MD, confirmed to Business Line from Hyderabad the developments regarding missile fuel, but declined to detail because of “strategic” reasons. He said that Premier, which already produces the fuel, would double its capacity in about two years. For the new project, it has already bought 150 acres of land off Hyderabad, near its existing plant, and purchase of another 100 acres from Indian Space Research Organisation at a subsidised rate would be complete in next three months (This has been aleady completed). The complete capex plan would be ready by six months, he added (This is also ready now). Premier has two overseas joint ventures in Turkey and Georgia (Both the Units started Commercial Productions and the company is getting overseas clients for the same). It also has 30 per cent equity interest in Premier Explochem, an explosive manufacturing outfit in Nashik. During FY 2004-05, it had hived off an explosives outfit as part of refocusing strategy. It also sold its Mushroom division assets for Rs 17.50 crore in April this year (The Company has reduced the interest burden with the money thus obtained and this is amply reflected in December, 2007 quarter results). (It is now a pure Defence Related company and is on its way of curving out a niche for itself). SO WHAT IS THE MANTRA NOW: JUST ACCUMULATE BEFORE IT RACES PAST Rs.60 mark once again. Just compare it with Solar Explosives Ltd and you will understand what I am saying.

Note: MY additions in the above write-up are given in coloured lines and in Brackets(Braces)....