GMM PFaudler Ltd. Multibagger Analysis

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 :

CapitalisationRs.5500 CRGMM-PFaudler-stock-analysis
History of Consistently Increasing Sales, Earnings & Cash FlowYesGMM-PFaudler-stock-analysis
Durable Competitive AdvantageHighGMM-PFaudler-stock-analysis
Future Growth Drivers / Sector GrowthModerateGMM-PFaudler-stock-analysis
Conservative Debt (long term debt < 3 Net Profit)Low DebtGMM-PFaudler-stock-analysis
Debt Equity Ratio, Current RatioLow Debt, Current Ratio is 2.57GMM-PFaudler-stock-analysis
Return on Equity must be Above Average23.5%GMM-PFaudler-stock-analysis
Low CAPEX required to maintain current operations
No
GMM-PFaudler-stock-analysis
Inventory Turnover Ratio, Debtor Days, ROCEDebtor days increasing, ROCE : 30%GMM-PFaudler-stock-analysis
Management is holding / buying the stockPromoter holding is at 54.95% But ReducingGMM-PFaudler-stock-analysis
Market Price < Intrinsic ValueOvervalued Intrinsic Value CalculatorGMM-PFaudler-stock-analysis
Stock Price is consolidating (now)NoGMM-PFaudler-stock-analysis
Stock Price is growing in past years along with EPS growthNoGMM-PFaudler-stock-analysis
Consolidated PE, PB Ratio, PEG Ratio
High

GMM-PFaudler-stock-analysis
Cash Flow Positive, Net Profit % greater than 8%Cash Flow: Negative; Profit: 11%GMM-PFaudler-stock-analysis
Paying Dividends, TaxDividends: 10% Tax: Low GMM-PFaudler-stock-analysis
EPS Growth RateAverage 30% above past 3 yearsGMM-PFaudler-stock-analysis
Jump in Trailing Result EPSYesGMM-PFaudler-stock-analysis
Jump in Quarterly Result EPSYesGMM-PFaudler-stock-analysis
Expected Gain in 5 Years
2X if substantial EPS growth arrives
GMM-PFaudler-stock-analysis
Price Movement Graph, 52 Week High & Low
Too High
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Volume AnalysisOkayGMM-PFaudler-stock-analysis
Power of BrandHighGMM-PFaudler-stock-analysis
Corporate Governance, Reputation of LeadersGoodGMM-PFaudler-stock-analysis
Fraud reportedNoGMM-PFaudler-stock-analysis

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.

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