GMM Pfaudler stock buy

Dear investor,

Please find below mentioned short term fundamental stock for delivery purpose.

 

Company	CMP	Target	BSE Code	NSE Code
GMM Pfaudler Ltd.	4440	5450	505255	GMMPFAUDLR

 

GMM Pfaudler Limited is a leading supplier of engineered equipment and systems for critical applications in the global chemical and pharmaceutical markets. GMM Pfaudler was established in 1962 as Gujarat Machinery Manufacturers. In 1987 Pfaudler Inc., of USA, the world leader in Glass Lined equipment subscribed to 40% and currently it holds 51% stake. Glass-Lined Equipment, one under GMM portfolio, is a corrosion resistant material used in varying processes of operation from production of pharmaceuticals to specialty chemicals and polymers. GMM has a market cap of Rs 5,298 cr.
 

Investment rationale
 

An established player with strong parentage: The Company is the largest manufacturer of Glass Lined Equipment in India with 50% market share which is primarily used in pharmaceutical, Specialty Chemical and Agro Chemical Industries.  GMM over the years has diversified its product portfolio to include Heavy Engineering Equipment, Mixing Systems, Filtration & Drying Equipment and Engineered Systems etc. The Product offerings include Reactors, storage vessels, columns, mixer systems, instrumentation, and reglassing services etc. With over five decades of manufacturing experience, GMM Pfaudler is a well-established company with backing of Pfaudler Inc. which is regarded as the Inventor of glass-lined steel. In 2008, GMM Pfaudler acquired Mavag AG, Switzerland. Mavag supplies highly engineered equipment for critical Filtration, Drying and Mixing applications to the Pharmaceutical and Biotech industries.
 

Announcement of new plant: Management has received an in-principle approval from the Board of Directors to set up a second facility in Hyderabad. Most of the clients are located nearby of Hydrabad, Vizag and new pharma city is coming there. Management assures demand arising from those locations will be catered by this new plant.
 

Limited impact of COVID on end-user industries: The company caters to the demand arising from industries like pharmaceuticals, Specialty Chemicals and Agrochemicals etc. These industries are considered immune to impediments incurred by pandemic and economic slowdown. These industries will continue to invest to increase their manufacturing capacity as well as to upgrade their manufacturing facilities which will ultimately benefit GMM.
 

China crisis improves opportunities: During the recent concall, management highlighted that there is a lot of traction as well as interest by customers for new projects and new products. Many customers are now asking to prepone deliveries. Pharma & chemical industries in India are likely to benefit from slowdown in China as many of the customers have already started the search for alternatives. This will ultimately result in rising demand for GMM.
 

Strong customer base: The customer base includes all leading players of pharmaceutical industries both global and domestic. In agrochemicals, it has all leading domestic, Japanese and US specialty molecule inventors like (Bayer, Coromandel, Rallis, Sumitomo, UPL, Rallis etc). Since, it is a specialised custom driven offerings, it ensures repeated orders from existing customers.
 

Strong financials & promising guidance: Although company reported de-growth in quarterly numbers (Q4FY20) on account of unprecedented event of pandemic the yearly numbers are quite robust. Revenue/EBITDA/PAT registered a robust growth of 18%/44%/41% respectively for FY20 over a corresponding period of last year on account of strong growth in glass line equipments segment. GMM continues to be net debt free and strong return ratio generating company. Management believes that they have reasonable visibility in terms of orders of next year. Topline is expected to register minimum of 15% revenue growth YoY along with improving in profitability. At current market price, the stock trades at P/E multiple of 57x of its 1-yr forward earnings which looks expensive yet justifiable on account of strong revenue visibility ahead.​

Duration of recommendation: Short to Medium term.
 

Best Regards,