This small-cap company has zoomed 95% in 9 days ahead of 1:5 stock split

Premier Explosives hit a record high of Rs 4,158.55 in Wednesday's intraday trade, and has zoomed 95% from a level of Rs 2,134.70 touched on June 5, 2024

Premier Explosives 1:5 stock split: Shares of Premier Explosives (PEL) hit a record high of Rs 4,158.55 as they rallied 7.5 per cent on the BSE in Wednesday's intraday trade ahead of 1:5 stock split. In the past nine trading days, the stock of the small cap company has zoomed 95 per cent from a level of Rs 2,134.70 touched on June 5, 2024.

At 09:43 AM, Premier Explosives was trading 2.4 per cent higher at Rs 3,963.85 as compared to 0.11 per cent rise in the BSE Sensex index. A combined 128,000 shares have changed hands, thus far, on the NSE and BSE.

PEL has fixed Friday, June 21, 2024, as the 'Record Date' for determining entitlement of equity shareholders for the purpose of sub-division/split of existing equity shares of the company such that every one equity share, having face value of Rs 10 each, will be subdivided into five equity shares having face value of Rs 2 each.

With a view to enhance the liquidity of the company's equity shares at the stock market and to encourage participation of retail investors by making equity shares of the company more affordable, the board has decided to sub-divide equity shares of the company, PEL said on the rationale behind the stock split.

Thus far in calendar year 2024, the stock price of PEL has more than doubled, zooming 162 per cent during the period. In comparison, the BSE Sensex has gained nearly 7 per cent. In the previous calendar year 2023, the market price of Premier Explosives had appreciated 277 per cent. It has also skyrocketed 7,260 per cent from its March 2020 low of Rs 56.50 on the BSE.

The company is engaged in manufacturing of high energy materials like bulk explosives, packaged explosives, detonators, detonating fuse, solid propellants, pyrogen igniters, pyro devices, etc., having applications in mining, infrastructure, defence, space, homeland security and such other areas. The company also operates and maintains solid propellant plants of defence and space establishments.

The company's marquee clientele comprises Singareni Collieries Company Limited (SCCL), Bharat Dynamics Limited (BDL), and Indian Space Research Organisation (Isro) with repeat orders from many customers.

PEL's current order book stands at Rs 965 crore, around 3.6x of FY24 revenue. Out of this, the defence segment has the majority revenue share of Rs 834 crore, which is 86 per cent of the total order book. The Explosive segment stands at Rs 19 crore and service segment, which is the operational maintenance, stands at Rs 111 crore.

Order Inflow in FY24 stood at Rs 711.5 crore (Excl GST). These included orders from BDL, L&T, and MoD (IAF), Elbit, and IAI, to be executed over the next 9-18 months.

The company said it is working towards securing more orders in defense and explosive Segments. Going forward, the inflow and execution of defence segment orders is expected to support the improvement in the company's margins and overall cash generation.

Meanwhile, in FY24, Premier Explosives had posted 320 per cent year-on-year (Y-o-Y) growth in its standalone profit after tax at Rs 28.12 crore, as against Rs 6.69 crore in FY23. Revenue from operations grew 34 per cent to Rs 271.7 crore from Rs 202.0 crore.

India, one of the largest mining and industrial explosives markets and the second largest coal producer, offers tremendous opportunities to Premier Explosives. With a direct connection to the level of industrialisation activities and construction and infrastructure projects in the nation, the demand for explosives has been on the rise, which endows benefits to the company.

The company caters to the demand of end-user industries such as mining, infrastructure, defence and aerospace. The demand prospects for the company’s products are expected to increase with the Government’s rising budgetary allocation towards defence.  Also, the  Government’s announcement of a negative list of imports to encourage domestic procurement and permitting the export of select products offer  opportunity  for  the  company  in  defence  supplies.  However, the tender-based bidding process and the long-drawn approval process may bring in lumpiness in revenues from this segment, ICRA said in its recent rating rationale.