Panyam Cements & Mineral Industries – Revival On Strong Growth !!!

Background: Cement is one product which is mostly dependent on local factors and is relatively insulated from the global turbulence, be it Fed action or China. Thus if we can find companies that are producing cements in the regions where there is disproportionate infrastructure growth and get them at good valuations, we would most likely have a winner on our hands. PANYAM CEMENTS & MINERAL INDUSTRIES is one such potential winner.

The Company: Panyam Cements & Mineral Industries is promoted by the promoters of Andhra Pradesh based Nandi Group and boasts of a strong management with background from IIM Ahemdabad. This A.P based Cement company supplies its products to TN,Karnataka,Goa and Kerala apart from Andra Pradesh. The present promoters had bought this company from previous promoters in late 2007 (at the height of infrastructure boom) at a price of 55rs/share which is close to today’s price. The company under new leadership undertook expansion but needless to say that came at a very wrong time. After that what followed was five years of dismal infrastructure growth which created a lot of demand and price problems. If this was not enough, the AP-Telangana issue created havoc for the company and demand almost dried. All this led to severe crisis in the company which also led to disconnection of power by APCPDCL (A.P. Central Power Distribution Company Ltd.) taking the operations of the company to stand still. This was the worst time for the company.

But  things have decisively turned around in the last three quarters for Panyam Cements. The power issue is resolved, the demand is surging and the cement prices are back on top. The Central Govt, along with a strong state government in the leadership of Chandra babu naidu has given a special thrust to Infrastructure development and this has only helped. Infact A.P. is the first state to complete india’s first river interlinking project. Coupled with this are the strong infrastructure development mandated state governments in its key customer states of Karnataka, Goa, TN etc. The power problem is also resolved for the company and the plant has started working fully. This could be the first year when the entire capacity would come into play which could mean a strong growth in the coming quarters for this company supported by strong industry tail winds. The promoters have been increasing their stake and the promoter pledge has also dramatically decreased and is now less than half of its previous quarter pledge of 99%.

Key Triggers:

  1. Promoter holding is consistently increasing in the last the few quarters and now stand at 52.15%.
  2. Promoter pledge has decreased. Promoters till last quarter had pledged 99% of their holding but have now reduced to around 47% of their holding. The promoters released most of their earlier pledge from L&T finance and created a new but lesser pledge with Kotak Bank.
  3. The company is witnessing strong demand from the neighboring states thanks to strong industry tailwinds.
  4. The debt has decreased since last year to 50cr from over 59cr.
  5. We are getting a chance to get in the company at a price which the present promoters paid to buy this company (55Rs/Share).
  6. This is the first time in so many years that the company is going to report a full year earnings. Strong earnings growth is going to follow. This is evident from the last three quarter earnings.

Valuations: Panyam Cements is trading at juicy valuations of around 3.2 times FY16 EPS of around 18Rs (to 21 Rs) and at a market cap of just 90cr (as against the 88cr sales done in just one quarter of Jun 15). It does not make sense to look at trailing PE because last year there were hardly any operations of the company (as explained above). The company has reported excellent operational performance in the last two quarters (i.e after re-starting of operations) and the company is expected to even better the performance in the next remaining quarters of the present FY. For the first quarter this FY, the company reported a turnover of over 68cr with a NP of 7.93 cr and an EPS of around 4.94 in just one quarter. This performance is expected to continue on back of strong operational performance and the demand that company is witnessing in the state(s) (as explained earlier).

Technicals: The strong turnaround is incidentally backed by very strong technicals. There were two strong lows made by nifty in the recent weeks. One was on panic Monday (24th Aug) and then a lower low was made which was around 150 points lower than earlier lows but its very significant to note that the stock Panyam made just one low which was during the panic Monday and when the nifty made the second significant low, Panyam made a low which was “10% higher than earlier low” and what’s more, that the lows were made on very small volumes. This is a sign of great technical strength of a stock. This week also stock has started a fresh upmove crossing one daily resistance after another and infact gave signs of fresh upmove on Friday. The stock is technically extremely solid.

The stock was languishing on back of issues plaguing the company which were mostly out of its control. Although it expanded its capacity by three times (to 1800 M. Tones/day) a couple of years back, it was unable to perform up to its potential due to the reasons explained above. Now the stock is on the cusp of strong re-rating on back of strong earnings growth. This is the second cement stock that we have discussed and before anyone starts asking questions like which one should one buy, I would just say please go through the stock story and decide yourself.

Disclaimer: It is safe to assume that I may have some vested interests in the stock. Also, the above stock view is my personal view in individual capacity. For rest, please look at the About page.

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171 Responses to Panyam Cements & Mineral Industries – Revival On Strong Growth !!!

  1. Value Investor says:

    Thank you ace. Good bless you:-)

  2. SAY says:

    “……………….strong growth in the coming quarters for this company supported by strong industry head winds”
    spotted a typo, ‘head winds’

  3. Souvik says:

    Thank You Sir.

  4. Jitendra says:

    ACE ,

    This is another great story after Katwa. Good one sir.

  5. anujpress24 says:

    Thanks. Not sure if the use of headwind is correct here ,shouldn’t it be tailwind. As cement sector has tailwinds blowing due to infra and road prjs. I might be wrong pls confirm

  6. A Goyal says:

    Looks very promising from your study/analysis. Demand for cement going forward will the key factor. Thanks for sharing.

  7. Keerthan says:

    Hi ace, your views on Bodhtree consulting, Jeevan scientific, Stampede capital would be very much appreciated.

    • bothtree, not a firmed up view. jeevan no change from prevoius view. stampede as i have been saying is for somebody with high risk and more importantly who understands the business they are in and if they do its not bad

  8. Akshay says:

    thanq ace

  9. Value Investor says:

    Hi Ace,
    I have gone through the company reports and it is very exciting and interesting.
    One small request. Please let me know where to find the promoters holding and pledging details.

    Once again Thank You very much for this GEM.

  10. A Goyal says:

    Subdued coal prices should further help the company and cement industry. What do you say?

  11. is the pledging 99%. i think so. could you share how you got the pledging is dectreasing. its 99% of the 52% of the promotors holding. that is around 53% of the total shares. not 52% of the promoter holding. i might be wrong. please correct me

    • i have clearly mentioned in the stock story that in they have recently unpledged most of their pledged shares from L&T finance and created new pledge with kotak but for much lesser number of shares. Please have a look the announcement sections.

  12. Puru says:

    Thank you for the new stock idea… will go through it.

  13. KKreddi says:

    Thanks Ace for the detailed analysis. The river interlinking project has just started. Please take it as an FYI.

  14. Ram says:

    Ace Ji,

    Cement prices have come down in Andhra. It might have an impact on both top and bottom line. Don’t you foresee any problem

  15. Aravind says:

    I liked this post, it looks like from the smell of it a certain multibagger. Panyam(the person) was an earlier MP from TDP. I guess that is an additional trigger. RD Damani also bought a South stock recently and that is surly Long term, so I guess Panyam located ideally and irrespective of fortunes of Industry is turning around

  16. Aravind says:

    Whats with NCL Industries sir, similar story and cheap but this one is in Telangana, it has a high growth broads business too

  17. rahul says:


    Please let me know your views on Ruchi infrastructure.


  18. RAVI says:

    V2retail website has been hacked by some tunisian hacker group…………It will become popular soon………….

  19. prem says:

    V2 retail site hacked!!!

  20. Praveen Rao says:

    v2kart site working fine though…

  21. umesh says:

    Hi ace is it advisable to buy associated stone at current levels before split or after split for long term

  22. umesh says:

    is it worth buying at current levels or should i wait for some more correction for averaging, what is the levels i should look for buying

  23. umesh says:

    Hi ace the reason why iam asking is that i missed averaging katwa at lower levels and now i dont want to repeat the same with associated stone

    • as mentioned numerous times in the past, i dont do portfolio management. people have to understand that they cannot sell at the top and buy at the bottom. if they like a stock at Xrs but dont like the same stock at 0.8Xrs, then there’s something fundamentally wrong with the investor’s conviction.

  24. A Goyal says:

    Any comments for Snowman Logistics or Wonderla Holidays. Both seem good to me for long term.

  25. umesh says:

    hi ace is max india shares is better before demerger or can i go with a cadila or natco

  26. acefollower says:

    As per the company website, capacity of plant is 3000 TPD while you have written as 1800 TPD. Kindly check.

  27. Rajendra says:

    I have been holding Sandhi Inds for some time now. I am convinced about the long term growth story. With two stories coming from you from cement sector, would request for your view in Sandhi Inds.

  28. acefan says:

    thanks ace…have been following your blog for quite a few days…but this is my first entry into your stock pick…looking forward for a multibagger…
    also what are your thoughts on HIL and visaka industries…with the future construction boom..I think they may be good picks with low valuations and good returns …your thoughts?

  29. hardyboy says:

    how is liberty at cmp of 206.any more downside.when will they start paying normal rate of tax

  30. Roshan says:

    Hi ace…any updates on the Agm of Gujarat themis held today??

  31. sangram says:

    While market is down and weak we have mangalam and Vidhi dyestuffs on the new highs. congrats ace bro.

    • this is why we say that we should not blindly see the broader markets and then plan our investing strategy. there would always be stocks that are in their own bull or bear markets irrespective of broader indices.

  32. hardyboy says:

    how is gabriel india

  33. Niraj Bhagtani says:

    Hi Sir,

    What are your views on SHEKHAWATI POLY-YARN LTD at Current Market price. The Company had a Profit of 7 Cr Previous Year. Fundamentally looks really strong … Please share your valuable views ?

  34. SP says:

    Hi Sir, we have been missing ur technical advice on facebook.. wud request u to throw some light on companies which are technically looking good at current prices, besides panyam of course🙂

  35. RAJESH says:

    india infoline has stopped the direct buying/selling of Z category stocks from their trading platform from 23rd Sep. Now in order to Buy/Sell, you need to call your RM and he will then check with the Risk Management Team and then allow/deny you buy/sell request. Its plain simple harassment of customers.

    • i totally agree with you. unfortunately i think even bigger guys do it. they should know investors are investing with their own money… i have been in your shoes so can surely understand the frustration.

  36. Raj says:

    Hi Ace,

    I came across your blog recently. What according to you are the most popular websites to track markets and companies news? I understand information comes from lots of sources but wanted to get your thoughts on what are your must read websites when you invest?

  37. sangram says:

    Read on mmb about Vidhi dyestuffs that in the agm they are targeting 500 cr. Turnover by 2020 . don’t you think bro the guidance is very much conservative.
    I don’t know the authenticity of the news . if you have any idea about this one please share bro.

  38. PL says:

    Hi ace, what is your current opinion on TWL?

  39. Naren says:

    What do you opine about Next Media, post Rakesh Jhunjhunwala’s 25 Cr. investmemt?Also, it seems that it could not bid successfully for any in Phase-3 FM auctions, but could only extend it’s licences from Phase-2 to Phase-3!What positivity does RJ see and what I ain’t?Kindly, throw some light!

  40. Sam says:


    What is your view on Talwalkars Better Value Fitness Ltd ? Can it do well in future as more Indians become health conscious and increasing disposable income. Theoretically looks good to a novice like me but have you tracked their operation, BS , management quality etc.


  41. Praveen Rao says: is back to function…

  42. A Goyal says:

    Is there any information available on current cement prices in AP where Panyam plant is located.

    • use google to your advantage.

      • SAY says:

        Had read somewhere :
        South based manufacturers enjoy premium of rs.50/60 per bag compared to northern counterparts. Though this has come down from rs.90 per bag. Recently northern manufacturers have increased their prices from 40 to 60 bucks in recent times.
        Disc: I am vested.

      • A Goyal says:

        I tried that before seeking some information from you. I was not able to find any good source of information on internet which can give me some idea if cement prices are going up or down or if they are stable. I bought some shares of Panyam yesterday and today and if you have any information on movement of cement prices then that may be helpful for me to decide whether to buy more of Panyam or not. Thanks.

  43. umesh says:

    Hi ace your view on pds multi the stock has tanked from 250 levels to 180 ,is it worth buying this share

  44. Ashish garg says:

    Hi ace,

    What are your views on Rexnord Electronics, if you ever tracked it?

  45. Shankar says:

    Dear Ace sir

    Pls share your views Enkei wheels, Insilco and DeNora. Thanks

  46. Roshan says:

    hi ace just a query on gujarat themis…if company has not planned for capex this year then how do u think they will make a net profit of 7.5cr this FY? in ur report u mentioned that any increase in the topline will significantly affect its bottomline…however in Q1 the topline did increase but not much change in the is operating at full capacity at im curious to know if its still possible?

  47. Vinay says:

    Dear Ace,

    pls forgive me to ask a stupid question regarding Panyam. If we see the June’15 results, the company has paid a small tax, MAT, amounting to only 56 lakhs on a PBT of 8.5 crores. Will we face a big tax amount on the last quarter of this year making all the profits of the previous quarters meaningless? Thanks in advance!

  48. afzal says:

    please what is wrong with nath biogenes which is falling everday

  49. Jp says:

    Dear Ace,
    Is the correct time to enter Motherson Sumi? Previously you told (when it was around 350 Rs), we might enter at declines…! CMP is 250 Rs… Tnx..!

  50. impu24 says:

    its current quoting @64 and high is 68 nothing much adding to credentialsother than it has not gone low, but the future prospects seems great.
    wht is the guarantee that in this volatility it wikk make up the stated EPS

    • guarantee? if you want guarantee, pls go to your bank and put your money in FD and pray to god that your bank does not go down the drain and i am hoping here that you have the “guarantee” that your god is listening to your prayers.

  51. Ace, what’s your take on Gati Ltd.?

  52. shreeux says:

    Hi Ace,

    Any view of Bombay Dyeing?

  53. Vetti says:

    Don’t you think the Panyam promoters political affiliation is a big risk? Do we need to be cautious about the management quality?

  54. Anil says:

    Dear Ace,ur views on Vimta labs at cmp arnd 68…is it good to add now.If you are tracking spicejet and Electrosteel casting please share ur views…thanks bro.

  55. Aluwalia says:

    PE of PANYAM is showing 293?

  56. Sagar says:

    Dear Ace, I request if you tell some stocks from the auto ancillary space you are bullish on. with today’s RBI rate cut, interest will go down which would probably boost auto sales which in turn can be good for the auto ancillary space as a whole..

  57. johnny says:

    hello ace any comments on fdc ltd

  58. skrai81 says:

    Can we still buy katwa and panyam?

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