3 March 2016
Pennar Engineered Building Systems
The Idea Junction
Equity Shares (m)
M.Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel. Perf. (%)
Emerging player in nascent markets
Economic recovery to provide strong tailwind
Financials & Valuation (INR m)
2016E 2017E 2018E
EPS Gr. (%)
Among the top 3 industry players, with 8% market share in the PEB industry; well
positioned to benefit from economic cycle recovery.
Nascent industry, with potential to post 15-20% CAGR over FY15-18 with capex cycle
PEBS Pennar to register 22% earnings growth over FY15-18, led by market share gain
and operating leverage benefit
Among the top 3 players in the PEB industry within five years of inception
PEBS Pennar, which commenced operations in FY11, has established itself as a
formidable player with 8% market share and is placed amongst the top three
players in the highly fragmented PEB industry (has more than 20 players in the
domestic market and 60% of the market is still with unorganized players) on the
back of its excellent a track record of timely execution of projects. Kirby building
systems of Kuwait, with installed capacity of 200,000mt in India, is the market
leader (15% market share).
EV/EBITDA (x) 11.0
Shareholding pattern (%)
Key beneficiary of capex cycle revival
PEB industry is highly correlated to the economic recovery cycle. The industry
has a strong linkage with Gross Fixed Capital Formation (GFCF) as its demand is
primarily driven by construction activity in industrial, commercial and
infrastructure sectors; and PEB sector growth has averaged at 2.0x-2.5x of GFCF
growth rate over the last 7 years. With capex cycle recovery and improvement in
business confidence, GFCF is expected to grow at around 8-10% over the next
five years which will drive industry growth of around 15-20% over same period.
Stock performance (1 year)
Earnings to register strong 22% growth over FY15-18
PEBS Pennar has registered revenue CAGR of 36% over FY11-15 v/s industry growth
of 13%, driven by market share gain-has garnered 8% market share within five
years. We expect PEBS Pennar to register and revenue CAGR of 11% over FY15-18.
We expect better utilization of the facilities and pick-up in the US business to
improve operating margins by 220bp to 12.6% in FY18, which would help PEBS
Pennar register strong 22% earnings CAGR over FY15-18.
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Interesting: Currently, the analyst
believes that this is an interesting
stock based on its fundamental
Cautious: Currently, the analyst
does not have adequate
conviction based on fundamental
assessment of the stock
In Transition: Currently, the
analyst thinks that the stock is in
transition from "Cautious" to
(Amit.Shah@MotilalOswal.com); +91 22 3029 5126
(Ankur.Sharama@MotilalOswal.com); +91 22 3982 5449
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