Precision wires india

Message

Executive summary:
cheap PE of 5.33
Market price of Rs. 100 is below book value of Rs.      137
good dividend yield of 4.4%
Diversification into wind power may lead to re-rating
At CMP of about Rs. 100, Precision Wire is quoting 
at a PE of 5.33 (the EPS for FY 10 is Rs. 18.76).
This is cheap. In addition, Precision Wire paid out a
 dividend of Rs. 4.4 (44% on Rs. 10 paid up) which translates to a 
dividend of 4.4%.
Further, Precision Wire has a book value of Rs. 137 
(Paid up capital: Rs. 11.56 crores + Reserves (excl. revaluation 
reserves) of Rs. 146.90 crores
So, Precision Wire gives you the protection of a low
 PE and good dividend yield. Your downside risk is nicely protected.
The icing on the cake is Precision Wire’s decision 
on 13^th May 2010 to set up a 2.1 MW wind energy project in 
Gujarat. The cost of the project is about Rs 12 crores.
This should lead to a re-rating of the share.
More About Precision
 Wires:
Precision Wires India is the largest manufacturer of
 enamelled copper winding wires in India. Precision Wire’s
 current installed capacity is over 25,000 metric tonnes/annum. This 
capacity is further being increased with several expansion projects in 
the pipeline. Precision Wires has three manufacturing 
facilities located at Silvassa, Dadra Nagar Haveli and Palej, Gujarat.
In 2006, Precision Wires entered into a long term 
Technology Transfer Agreement with ESSEX Italy for the 
manufacture of Continuously Transposed Conductors (CTC), Enamelled 
Copper Strips and various other types of Rectangular Insulated Winding 
Wires. ESSEX Italy is a world leader in the manufacture
 of Rectangular Insulated Conductors and is one of the largest and most 
renowned global producers of CTC. The agreement gives us full access to 
the latest technology for all the products.
In 2008-09, Precision Wires‘ operations suffered a 
severe set back owing to the sudden and steep fall in the price of 
Copper, its Primary Input, from October 08 onwards. This resulted in 
losses on sale of its finished product. Also, due to sudden economic 
slow-down in the 2nd half of the year, its customers deferred taking 
delivery of the finished product though it had to take delivery of 
Copper against its commitments. Due to this mis-match, Precision
 Wires was forced to sell its finished product at lower market 
price which resulted in losses. Furthermore, Precision Wires
 incurred losses on inventory of Copper.
Of course, Precision Wires is back on the growth track for FY
 2009-10 as witnessed from the figures given above. 