Pacific Industries Ltd Looking Good After Long Correction
Looking Good For Long-Term Holding .
Good Fundamentals and Business Model
Stock is trading at 0.34 times its book value
CMP @ 215.30 AND BOOK VALUE @ 629
Quarterly Results Out as.....
Item YOY Mar 2024
Sales ⇡ 47% 59.6
EBIDT ⇡ 309% 5.34
Net profit ⇡ 186% 4.72
EPS ⇡ 187% ₹ 6.85
Positive factors
• Sustained Improvement in scale of operations marked by total operating income (TOI) above Rs.350 crore along with PBILDT
margin above 13% on sustained basis.
• Improvement in working capital cycle below 100 days.
Key strengths
Experienced and qualified management with strong group presence
Mr. Jagdish Prasad Agarwal, Chairman and Managing Director of PIL, has more than three decades of experience and looks after
overall affairs of the company. He is assisted by Mr. Kapil Agarwal, Executive Director, who has around 13 years of experience in
the industry. Further, the promoters are supported with the experienced second-tier management. The company belongs to
Udaipur based Geetanjali Group and group concerns include Ojaswi Marbles and Granites Private Limited, Geetanjali Marble,
Krishna Marble, Pacific Exports, Pacific Leasing and Research Limited, Yash Processors Private Limited, Pacific Iron manufacturing
Limited, Chaitanya international Mineral LLP and Geetanjali University.
As per the clarification submitted by PIL to stock exchange on February 21, 2023, Income Tax department has conducted inquiry
under section 132 and 133 of Income Tax Act, 1961 from February 16, 2023, to February 21, 2023. As conveyed by PIL’s
management to CARE Ratings, there have been no material findings from the inquiry conducted so far. As per disclosure made
to stock exchange, PIL will update stock exchange on material information of event, if any. CARE Ratings shall however continue
to monitor the developments of the case and its impact, if any on the credit profile of PIL.
Established track record of operations and diversified product portfolio
PIL was incorporated in the year 1989 and has a track record of more than three decades in the industry having established
relationship with its customers and suppliers. The company majorly exports its products to USA, Europe, Indonesia, Vietnam as
well as Middle East countries. Over the years, PIL has received various awards and certification, such as “Star Export House”
certification from the Ministry of Commerce and Industry, certificate of life member of All India Granite and Stone Association. It
also has membership of Centre for Development of Stones and Confederation of Export Unit.
Further, the company offers diversified products which includes variety of North Indian and South Indian granites in different
styles, color, size and pattern etc. Further, it has flexibility to manufacture different varieties of quartz slabs by blending resins
with quartz and other key materials to get slabs with desired colour, hardness and durability.
Location advantage with ease of availability of raw material and labour
PIL’s processing facility of granites is situated in Rajasthan and Karnataka which has the largest reserve of marbles & granites in
India with estimated reserves of 2075.64 crore cubic metres accounting of more than 91% of the total marble reserves of the
country. There are many units located in the cities of Rajasthan, Karnataka and Andhra Pradesh which are engaged in the business
of mining and processing of marbles and granites. Further, skilled labour is also easily available by virtue of it being situated in
the marble & granite belt of India.
Moderate profitability albeit moderation in scale of operations
PIL’s Total operating income (TOI) declined by 35% y-o-y to Rs. 184.11 crores as against Rs.285.40 crore in FY22. The decline
was on account of decrease in quartz sales due to levying of anti-dumping duty in July 2022 by U.S. Department of Commerce
and no sales from trading of iron ore in FY23. The anti-dumping duty was subsequently reversed in January 2023. In 9MFY24,
PIL achieved sales of Rs. 134.93 crores. PBILDT margin of PIL moderated by 322 bps to 7.55% in FY23 as against 10.46% in
FY22 on account of higher raw material cost as well as lower absorption of overhead costs. However, in 9MFY24, PBILDT margin
improved to 13.94% on the back of lower manufacturing expenses.
Comfortable capital structure albeit moderate debt coverage indicators
The capital structure of PIL improved with overall gearing of 0.43x as on FY23 end (1.25x in FY22). Improvement in overall
gearing was on account of successful completion of rights issue of Rs.47.53 crore in February 2023 which resulted in augmentation
of networth base as well as reduction in o/s debt with repayment of USL from directors/ subsidiaries and repayment of working
capital borrowings. The debt coverage indicators however continued to remain moderate in FY23 due to lower profitability with
PBILDT interest coverage of 1.72x (4.50x in FY22) and total debt/ GCA of 5.53x (6.20x in FY22)
Good Fundamentals and Business Model
Stock is trading at 0.34 times its book value
CMP @ 215.30 AND BOOK VALUE @ 629
Quarterly Results Out as.....
Item YOY Mar 2024
Sales ⇡ 47% 59.6
EBIDT ⇡ 309% 5.34
Net profit ⇡ 186% 4.72
EPS ⇡ 187% ₹ 6.85
Positive factors
• Sustained Improvement in scale of operations marked by total operating income (TOI) above Rs.350 crore along with PBILDT
margin above 13% on sustained basis.
• Improvement in working capital cycle below 100 days.
Key strengths
Experienced and qualified management with strong group presence
Mr. Jagdish Prasad Agarwal, Chairman and Managing Director of PIL, has more than three decades of experience and looks after
overall affairs of the company. He is assisted by Mr. Kapil Agarwal, Executive Director, who has around 13 years of experience in
the industry. Further, the promoters are supported with the experienced second-tier management. The company belongs to
Udaipur based Geetanjali Group and group concerns include Ojaswi Marbles and Granites Private Limited, Geetanjali Marble,
Krishna Marble, Pacific Exports, Pacific Leasing and Research Limited, Yash Processors Private Limited, Pacific Iron manufacturing
Limited, Chaitanya international Mineral LLP and Geetanjali University.
As per the clarification submitted by PIL to stock exchange on February 21, 2023, Income Tax department has conducted inquiry
under section 132 and 133 of Income Tax Act, 1961 from February 16, 2023, to February 21, 2023. As conveyed by PIL’s
management to CARE Ratings, there have been no material findings from the inquiry conducted so far. As per disclosure made
to stock exchange, PIL will update stock exchange on material information of event, if any. CARE Ratings shall however continue
to monitor the developments of the case and its impact, if any on the credit profile of PIL.
Established track record of operations and diversified product portfolio
PIL was incorporated in the year 1989 and has a track record of more than three decades in the industry having established
relationship with its customers and suppliers. The company majorly exports its products to USA, Europe, Indonesia, Vietnam as
well as Middle East countries. Over the years, PIL has received various awards and certification, such as “Star Export House”
certification from the Ministry of Commerce and Industry, certificate of life member of All India Granite and Stone Association. It
also has membership of Centre for Development of Stones and Confederation of Export Unit.
Further, the company offers diversified products which includes variety of North Indian and South Indian granites in different
styles, color, size and pattern etc. Further, it has flexibility to manufacture different varieties of quartz slabs by blending resins
with quartz and other key materials to get slabs with desired colour, hardness and durability.
Location advantage with ease of availability of raw material and labour
PIL’s processing facility of granites is situated in Rajasthan and Karnataka which has the largest reserve of marbles & granites in
India with estimated reserves of 2075.64 crore cubic metres accounting of more than 91% of the total marble reserves of the
country. There are many units located in the cities of Rajasthan, Karnataka and Andhra Pradesh which are engaged in the business
of mining and processing of marbles and granites. Further, skilled labour is also easily available by virtue of it being situated in
the marble & granite belt of India.
Moderate profitability albeit moderation in scale of operations
PIL’s Total operating income (TOI) declined by 35% y-o-y to Rs. 184.11 crores as against Rs.285.40 crore in FY22. The decline
was on account of decrease in quartz sales due to levying of anti-dumping duty in July 2022 by U.S. Department of Commerce
and no sales from trading of iron ore in FY23. The anti-dumping duty was subsequently reversed in January 2023. In 9MFY24,
PIL achieved sales of Rs. 134.93 crores. PBILDT margin of PIL moderated by 322 bps to 7.55% in FY23 as against 10.46% in
FY22 on account of higher raw material cost as well as lower absorption of overhead costs. However, in 9MFY24, PBILDT margin
improved to 13.94% on the back of lower manufacturing expenses.
Comfortable capital structure albeit moderate debt coverage indicators
The capital structure of PIL improved with overall gearing of 0.43x as on FY23 end (1.25x in FY22). Improvement in overall
gearing was on account of successful completion of rights issue of Rs.47.53 crore in February 2023 which resulted in augmentation
of networth base as well as reduction in o/s debt with repayment of USL from directors/ subsidiaries and repayment of working
capital borrowings. The debt coverage indicators however continued to remain moderate in FY23 due to lower profitability with
PBILDT interest coverage of 1.72x (4.50x in FY22) and total debt/ GCA of 5.53x (6.20x in FY22)