GMM Pfaudler Ltd has experienced a fall of more than 35% since September when its stock price dropped from Rs.5926 to the current market price of Rs.3765.
In this article, we at Futurecaps have analysed the GMM Pfaudler Ltd stock for you to provide a comprehensive outlook of the company’s growth.
About GMM Pfaudler Ltd
Established in 1962, GMM Pfaudler is a multinational company well known for its invention of glass coated steel.
Moreover, company’s innovative strategies to successfully commercialise & produce storage tanks, reactors & various other vessels for chemical industries has made it a strong & established player in the market.
GMM Pfaudler majorly deals in manufacturing of glass & fluoropolymer based reactors & components for chemical as well as pharmaceutical industries.
Following are the Checklist parameters :
| Capitalisation | Rs.5500 CR |  |
| History of Consistently Increasing Sales, Earnings & Cash Flow | Yes |  |
| Durable Competitive Advantage | High |  |
| Future Growth Drivers / Sector Growth | Moderate |  |
| Conservative Debt (long term debt < 3 Net Profit) | Low Debt | |
| Debt Equity Ratio, Current Ratio | Low Debt, Current Ratio is 2.57 | |
| Return on Equity must be Above Average | 23.5% | |
| Low CAPEX required to maintain current operations | No |  |
| Inventory Turnover Ratio, Debtor Days, ROCE | Debtor days increasing, ROCE : 30% | |
| Management is holding / buying the stock | Promoter holding is at 54.95% But Reducing | |
| Market Price < Intrinsic Value | Overvalued Intrinsic Value Calculator |  |
| Stock Price is consolidating (now) | No | |
| Stock Price is growing in past years along with EPS growth | No | |
| Consolidated PE, PB Ratio, PEG Ratio | High | |
| Cash Flow Positive, Net Profit % greater than 8% | Cash Flow: Negative; Profit: 11% | |
| Paying Dividends, Tax | Dividends: 10% Tax: Low | |
| EPS Growth Rate | Average 30% above past 3 years | |
| Jump in Trailing Result EPS | Yes | |
| Jump in Quarterly Result EPS | Yes | |
| Expected Gain in 5 Years | 2X if substantial EPS growth arrives |  |
| Price Movement Graph, 52 Week High & Low | Too High | |
| Volume Analysis | Okay | |
| Power of Brand | High | |
| Corporate Governance, Reputation of Leaders | Good | |
| Fraud reported | No | |
Positive Factors for GMM Pfaudler Ltd
- Growing demand in pharmaceutical industry can enhance company sales growth
- Improvement in margins has been observed during the quarter ending in September due to good product mix & availability of cheap raw material.
- GMM Pfaudler standalone EBITDA grew by 50% in Quarter results & 38% as per YoY reports
- Absence of any strong competitor, GMM Pfaudler is expected to stay as a sole majority supplier in glass coated equipment
Concerning Factors
- On September 21, the company promoters sold upto 28% stake through OFS (Offer For Sale). Promoters sold around 40 lakh shares at a floor price of Rs.1433 inspite of trading at a price of Rs.3500. This is a discount of approximately 33%.
- Urmi Patel, an insider stakeholder, recently shed Rs.19 million worth of stock from her portfolio at Rs.3,519 per share.
- Also, GMM Pfaudler no purchase of any shares was done by insiders since the last year.
- Technical Analysis shows that the stock is overbought & is estimated to be overvalued
- The growth in sales during September Quarter seems to be due to sudden increase in demand in pharmaceutical industry because of the impact of pandemic. Slowing of demand can impact stock valuation tremendously.
Conclusion
NOT A MULTIBAGGER
Therefore considering all the fundamentals governing the company growth, we at Futurecaps find the GMM Pfaudler stock overvalued & the current market price seems to be an overestimation as its trading way more than its book value.