Premier Auto - Wants to Be Your PAL again!
Printed From: The Equity Desk
Category: Investment Ideas - Creating winning portfolios!
Forum Name: Stock Synopsis
Forum Discription: A bried discussion of companies on very specific matters. Normally this is the prelude for further research as always members would be discussing quality companies with good management only
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=2378
Printed Date: 21/Apr/2025 at 1:40am
Topic: Premier Auto - Wants to Be Your PAL again!
Posted By: smartcat
Subject: Premier Auto - Wants to Be Your PAL again!
Date Posted: 08/Sep/2009 at 1:17pm
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Premier Automobiles (cmp: Rs. 115), the erstwhile maker of "sporty" alternative to Ambassador - the Premier Padmini - has been making some moves recently.
- Auto magazines nowadays have full-page ads of Premier's new products like 1-ton cargo vehicle (like Tata Ace), Ambulance, school bus, passenger & cargo van etc - all based on the same chassis and same engine that used to power Peugeot 309 diesel (TUD5 engine) car.
- They have tied up with a Chinese company and will be manufacturing mini-SUVs and cars in India, at killer prices. There is already a road-test of their SUV in the latest issue of Autocar India.
- They already have a decent auto-component business. They closed FY09 with sales of Rs. 130 cr and a net profit of Rs. 13 cr. Has a dividend yield of over 2% and a market cap of Rs. 380 cr.
- They apparently have land worth Rs. 700 cr.
The bait has been set. Anybody willing to bite? For now, I'll wait and watch, but would probably make sense as a "turnaround story" at half the current market cap.
Website: http://www.premier.co.in - www.premier.co.in
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Replies:
Posted By: rapidriser
Date Posted: 08/Sep/2009 at 2:42pm
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The shareholder unfriendly management is an added bonus for you
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Posted By: basant
Date Posted: 08/Sep/2009 at 2:46pm
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The Big bear had shorted this stock several years back to Rs 9 from Rs 90. His position increased for every tick and he was holding the maximum short when it was at Rs 9 now this is not in F&O now so I do not know how he did it but this was several years back. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: smartcat
Date Posted: 08/Sep/2009 at 3:04pm
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I know the Big Bull. I wonder who's the Big Bear!
hey! I'm offended!
 By the way, Premier's SUV will be called Zoyte and it looks like http://images.google.co.in/images?hl=en&safe=off&rlz=1T4GGIH_enIN260IN260&um=1&sa=1&q=zoyte+suv&aq=f&oq=&start=0 - this .
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Posted By: chimak10
Date Posted: 08/Sep/2009 at 3:06pm
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Big bear is radhakishna damani
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Posted By: nav_1996
Date Posted: 08/Sep/2009 at 3:29pm
They have failed too many times. I would bet my money on a possible winners. 13 cr profit for 380 cr market cap. That means more than 30 PE for this 
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Posted By: basant
Date Posted: 08/Sep/2009 at 3:42pm
Smartcat: Will you replace your Chameli with a Padmini? If so then I can contemplate buying one share so that I can make some noise at the AGM.------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: smartcat
Date Posted: 08/Sep/2009 at 4:01pm
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If I buy a Padmini, I will definitely become single again!
But Maruti, M&M and Tata Motors too make lots of cars I wouldn't buy. That doesn't mean other people wouldn't buy either. Anyway, Chinese bikes were supposed to a big threat to Hero Honda & Bajaj 5 years back. But the Chinese came and went, and nobody even noticed.
Yes, 30 P/E is high. Might be worth at dekho at 10 P/E. Although profits are down, sales have been growing since the past 3 years.
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Posted By: subu76
Date Posted: 08/Sep/2009 at 5:29pm
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The company has really turned around in the last 3-4 years i think. They are now essentially about machine tools and end to end machine services. Perhaps they are the best Indian bet to play the heavy machine tools segment....
In the machining services they have ramped up their capability 400% last fiscal year. Right now they have also derisked their model and have won customers in Wind energy, power and defence....BEML, Cummins etc. So their operating revenues grew 15% (i think) despite a 60% slump in sales to automobile companies. The end to end service business is also growing quickly....
While they have a fledging automobile business...that business has not taken off yet...Management has promised not to throw a lot of money into this. Management thinks that business will take off when credit becomes available.
The younger Doshi (older Doshi died last year) really wants to make a difference.
 The reason why i personally find this stock very interesting is that the promoters are buying a lot of this stock thought it's at 24+ PE. This plus the fact that management says that revenues from the large contracts have not started coming in.....
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Posted By: nitin_jagtap
Date Posted: 08/Sep/2009 at 5:31pm
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What has incentivised Mr Doshi to suddenly start taking interest in the business which should have been done long time back and which could have avoided the numerous failures. If we know the reason we can then decide. The land will just remain as asset which will never be sold IMO. ------------- Warm REgards Nitin Jagtap |
Posted By: subu76
Date Posted: 08/Sep/2009 at 5:33pm
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Yeah....that is the key point.....Bap beta dono kala dhabba mitana chahte hain i guess.....
Their earlier repuation makes buying it very very hard indeed.....
On their land holding...a few years back they decided to sell it...and then they backtracked....
But one thing is for sure....they have indeed diversified the business from autos to other sectors....
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Posted By: nav_1996
Date Posted: 08/Sep/2009 at 7:04pm
| They could not hold their turf when they had a great brand and duopoly. Not sure how well they will compete in machining where there are so many organized/unorganized plays. Even auto segment they are targetting is very comeptitive - Tata, Bajaj, Mahindra, Force etc. |
Posted By: subu76
Date Posted: 08/Sep/2009 at 7:13pm
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nav_1996....could you please name any of the organized players....preferrably listed.....It will be good to check competition
Their claim is that their costs are lower by 20-25% and servicing better since they are located in India......Their claim is that most of their competition is from players from Taiwain and South Korea....
Since they won the Nano contract and some PSU contracts i thought there might be some credence.....but could not see how to independently verify this data point
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Posted By: nav_1996
Date Posted: 08/Sep/2009 at 7:51pm
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Sorry Subu. I was wrong. I thought they are in machining. But looks like they make machine tools.
But even for machine tools areas you have listed players are Lokesh Machines and Wendt India(grinding). Chellenge with this business is that it is one time purchase and does not get obsolete immediately. e.g Manugraph - printing machinery was showing great growth when all newsapaper capacities were coming up. But now volumes have gone cosiderably down. |
Posted By: subu76
Date Posted: 08/Sep/2009 at 8:20pm
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Hey Nav_1996, thanks for the competitor names. I'll certainly check up Lokesh if details are available.....
On the opportunity front.......India has about 0.7% of the world's Machine tool market only.....so if you belive in the growth story that is there.
But this is a pure industrial/auto cyclical business
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Posted By: kulman
Date Posted: 08/Sep/2009 at 9:18pm
 ha ha ha!By the way, what happened http://www.theequitydesk.com/forum/forum_posts.asp?TID=870&KW=chameli+bebo&PID=116737#116737 - to Bebo ? |
Posted By: Mohan
Date Posted: 08/Sep/2009 at 11:00pm
Whose plant/ property did Indiabulls Real Estate make an offer on in Kurla ? I thought it was PAL. ( obviously I am mistaken ) ------------- Be fearful when others are greedy and be greedy when others are fearful. |
Posted By: subu76
Date Posted: 08/Sep/2009 at 11:31pm
| Probabily.... PAL's land is in Kalyan area... |
Posted By: rapidriser
Date Posted: 08/Sep/2009 at 7:55am
PAL's original plant was in Kurla. A substantial part of it has been sold to HDIL. I believe another part of it which they had sold to Fiat earlier was sold by Fiat to IL&FS. I do not think they have any land now at Kurla.
PAL also has substantial land in Kalyan.
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Posted By: subu76
Date Posted: 10/Sep/2009 at 5:56pm
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rapidriser...any idea how much their land would be worth?
They own 216 acres of land in Dombivili, Kalyn. It's carried on their balance sheet at 61 cr.
Maybe that would expain the high valuation for this company.
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Posted By: smartcat
Date Posted: 10/Sep/2009 at 5:59pm
| Rs. 700 cr, if you believe Dalaal Street Magazine. They can get the best returns out of it if they build a Premier Padmini Museum |
Posted By: subu76
Date Posted: 10/Sep/2009 at 6:09pm
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Smartcat does the figure look reasonable at all? I am not aware about this particular area but the 700 cr seems probable atleast based on some of the other prices i've heard.
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Posted By: subu76
Date Posted: 10/Sep/2009 at 6:31pm
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Their Machine tool division's sale data
Yr Number of machines
07 - 94
08 - 98
09 - 85
Production Capacity in 08 - 200 machines roughly.
Given, this why would the company spend a lot of money increasing production capacity to 1000 machines between 08-09.
Perhaps that's because this is a cyclical industry and management expects better times ahead...Not sure.....what it is
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Posted By: rapidriser
Date Posted: 10/Sep/2009 at 6:34pm
216acres = 9,408,960 square feet.
Rs.700 crore translates into Rs.638 per sq.ft. This is definitely not a wild overestimate of the price of land at Kalyan Dombivli.
However, you really have to check the terms of the land lease to make a proper valuation. For example there may be restrictions on the use of land for purposes other than as a manufacturing unit. In that case the company would have to spend a lot of time and money to get the restrictions removed.
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Posted By: subu76
Date Posted: 10/Sep/2009 at 6:56pm
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Also, the company is not planning to sell the land any more.
But perhaps that explains the high valuation visa a vis actual profit.
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Posted By: Mohan
Date Posted: 10/Sep/2009 at 8:21pm
Who will come to see the museum ? NO matter how big the opportunity. Who wants to trust the promoter ? ------------- Be fearful when others are greedy and be greedy when others are fearful. |