This defence company's stock has soared 102% in 2 weeks; posts solid Q1 nos

Shares of Premier Explosives were locked in 10 per cent upper circuit after the company's Q1FY24 profit jumped over six-fold to Rs 8.26 crore

Shares of Premier Explosives (PEL) were locked in the 10 per cent upper circuit, ahitting a new record high of Rs 889.15, at 02:59 PM on the BSE on Wednesday after the company reported over six-fold rise in its consolidated profit at Rs 8.26 crore for the June quarter (Q1FY24).

The company had posted profit of Rs 1.3 crore in the year ago quarter, and Rs 2.43 crore in the previous quarter (Q4FY23). It surpassed the entire previous fiscal year's (FY23) profit of Rs 6.97 crore in the first quarter of the current fiscal.

The company's revenue from operations grew 20 per cent year-on-year (YoY) at Rs 61.95 crore, as against Rs 51.77 crore in Q1FY23. The raw material cost declined to Rs 28.53 crore from Rs 29.91 crore in the previous year quarter.

In the past two weeks, the stock price of the company has more-than-doubled, zooming 102 per cent from level of Rs 440 on July 5.

PEL is primarily involved in the manufacturing and sale of high-energy materials. The bulk explosives, packaged explosives, and initiating systems manufactured by PEL find application in the mining, infrastructure and construction industries.

The company has also diversified into the manufacturing of propellants for missiles and rockets, and also strap-on motors for satellite launch vehicles. The extended capabilities of the company include products such as chaff, IR flares, explosive bolts, pyro devices, smoke markers, cable cutters, tear gas grenades, and other products, including pyrogen igniters for defence and space applications.

PEL is also involved in the operation and maintenance (O&M) services of solid propellant plants at the Sriharikota centre of the Indian Space Research Organization (Isro).

In the past seven trading days, the stock has skyrocketed 81 per cent after the company announced that it has received orders worth Rs 552 crore from the Ministry of Defence (MoD) for procurement of Flares and Chaffs.

PEL said it has won contracts worth of Rs 292.11 crore from the Indian Air Force for supply of Chaffs, and orders amounting to Rs 260.15 crore for supply of Flares. These orders are to be executed within 12 months.

Earlier, on July 6, the company had received orders worth Rs 76.78 crore from MoD, Air HQ (Vayu Bhawan) for supply of 50 MM MTV Flares. It also won Rs 9.73 crore order from Bharat Dynamics for supply of Booster Grains.

Icra Ratings, recently, reaffirmed the instruments of PEL, factoring in improved operating margins in FY2023, driven by higher contribution from the commercial explosive segment as well as increasing share of the high-margin defence segment. PEL's margin is expected to improve in the near to medium term, supported by the execution of margin-accretive defence segment orders.

"The ratings consider the favourable medium-term demand outlook with increased demand from the end-users such as the mining, infrastructure and defence sectors. The Atmanirbhar Bharat Abhiyan of the Government of India (GoI), which is aimed at curtailing import dependence and increasing the sourcing of indigenous defence products, also presents large growth opportunities for the company," Icra said.