>PRECISION WIRES (SUNIDHI SECURITIES)

Company Description: Promoted by Atlas Wires in 1988, Precision Wires India set up a plant to manufacture enamelled copper winding wires, which was funded by way of a public issue in March '92. AWL’s first manufacturing facility was set up in 1981 in the state of Gujarat. In 2001, AWL was amalgamated with PWIL. PWIL is a market leader for producing enameled copper winding wires which are used for electric motors, switch gears and transformers. PWIL has three manufacturing facilities located at Silvassa, Dadra Nagar Haveli and Palej, Gujarat with a total capacity of 32, 820 tpa. It also manufactures CTC (continuously transposed conductors) and PICC (Peripherally Inserted Central Catheter).

Highlights: PWIL suffered sharp set-back in profitability because during the period July -Dec 08, there was unprecedented fall in copper prices. Due to such meltdown, its customers unilaterally refused to take delivery of finished products against confirmed orders. However, PWIL had to take delivery of high priced copper against its commitments. Due to these reasons, the results for FY09 were adversely affected. The company is now back on the fast track.

PWIL caters to a wide spectrum of industries like power, electronics, industrial equipment, consumer durables, agri-equipments and special purpose machines. Its wires are widely used in equipment such as: rotating machines, alternators, hermetic motors (for refrigeration and air conditioning equipment), power and distribution transformers, control and power supply transformers, ballasts, auto electrical, electric hand tools, house hold appliances, fans, switchgear, relay and magnet coils, Instruments and audio coils etc.

PWIL has a long term technology tie up with Essex, Italy for the manufacture of CTC, enamelled copper strips and various other types of rectangular insulated winding wires. PWIL’s customers include large and medium electrical and electronic equipment manufacturers both in India and abroad. India has the fifth largest generation capacity in the world with an installed capacity of 152 GW as on 30 September 2009, which is about 4 percent of global power generation. The average per capita consumption of electricity in India was estimated at 704 kWh during FY09. However, this is fairly low compared to some of the developed and emerging nations such US (~15,000 kWh) and China (~1,800 kWh). The world average stands at ~2,300 kWh. Aided by ambitious plan to add 78.7 GW of additional generation capacity in the 11th plan by the year 2012, according to CRISIL Research estimates, about Rs 7, 50,000 crore is likely to be invested in the power sector by 2013-14. Of this, INR 4, 80,000 crore is expected to be invested in the power generation space. As the electrical equipment segment is the largest user of PWIL products, the huge investments in the power sector spell bright prospects for PWIL.

At the CMP of Rs 76, the share is trading at a P/E of 4.1X on FY10E and 3.5 on FY11E. We recommend BUY with a target of Rs 100 in the medium term.

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