Fundamental Analysis of Paramount Communications – Insights
Fundamental Analysis of Paramount Communications: The infrastructure sector is an integral part of the Indian economy. Strong infrastructure growth is essential to achieve India’s ambitious goal of becoming a $5 trillion economy by FY25. The Indian government has earmarked significant amounts of funding for infrastructure, with a focus on power, roads, rail, infrastructure and renewable energy sources.
As India becomes increasingly developed, the need for better connectivity increases. This is the company we’re going to talk about today. The company is a cable manufacturer with nearly 60 years of experience. Let’s learn more about the company and understand its financials to determine if it is a profitable investment.
Fundamental Analysis of Paramount Communications – Company Overview
Paramount Communications It is part of the Paramount Cables group, India’s leading wire and cable manufacturing company. Over the past 60 years of operation, the group has a portfolio ranging from high-voltage to low-voltage power cables. Specialty cables such as telecommunication, railway, data and fire survival cables.
The company has a strong clientele across power, communications, railways, information technology, construction, defense and space research. The company’s major customers include governments, institutions, and major private companies operating domestically and internationally.
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Established in 1955, the company began as a small cable manufacturing unit founded by its founder, Mr. Shyam Sunder. The company was renamed Paramount Communications in 1978 and began supplying telecommunications cables to the Ministry of Communications that same year.
Paramount has strong exports, which accounted for 50.3% of its revenue earned in FY23. The company’s main export markets include the UK, Spain, Russia, South Africa, the Middle East, Chile and other Asian countries.
The company also provides integrated turnkey project services using complex technologies in difficult locations. Paramount is responsible for construction, design, supply, engineering, installation testing and commissioning. These engineering procurement and construction contracts contribute 2.8% of the company’s revenue.
Industry Overview
India has become one of the largest synchronously interconnected countries. power grid The transmission lines are 4,71,817 ckm and the conversion capacity is 11,85,058 MVA (as of April 2023). In fiscal 2022-23, 1,77,641 ckm of transmission lines and 6,28,329 MVA of transformer capacity will be added. This has brought the inter-regional power transmission capacity to 1,12,250 MW, a remarkable increase of 212% since 2014.
The wire and cable (W&C) industry accounts for approximately 45% of the Indian electrical industry. The domestic W&C market is expected to grow at a remarkable CAGR of 12% during FY 2021-26.
The rapid growth of the organized sector and the government’s focus on investment in infrastructure and development projects will fuel large-scale growth across sectors including infrastructure, power, telecom, transmission and distribution, and automotive.
Growth in renewable power generation, expansion and improvement of transmission and distribution (T&D) infrastructure, rising investments in metro rail and smart grid projects, and growth in the data center sector will also contribute to strong demand for wires and cables in India.
Increasing urbanization and commercialization are expected to strengthen investments in the real estate industry and increase the demand for low-voltage insulated wires and cables.
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Fundamental Analysis of Paramount Communications – finance
Sales and Net Profit
Paramount Communications reported revenue of Rs. 797 Cr in FY23, up 37% from Rs. 581 Cr in FY22. The surge in sales is due to an increase in domestic power cable sales, which accounted for 42.5% of sales in FY23 compared to FY22. However, since FY21, Paramount’s revenue has grown at a CAGR of 6.7%.
On the other hand, net profit increased by more than 5.82 times from Rs. 8.2 Cr in FY22 is a whopping Rs. 48Cr in FY23. The impressive increase in net profit is driven by increased margins resulting from lower manufacturing costs. Other income of Rs. 16 Cr also helped in the surge in net profit.
profit
The company operates on razor-thin margins of less than 10% on its products. In FY23, the company’s margins increased from 4.13% in FY22 to 7.9% in FY23 due to lower operating expenses. Operating margins were five times higher at 3.68% in FY21 and have now recovered.
The net profit margin has become even more dire as the company was able to maintain a margin of 5.88% in FY23. However, these margins stood at just 0.59% in FY21, the lowest in five years. Driven by growth in other income, Paramount recorded its highest profit margin of 5.88% in FY23, while its five-year average remained at around 3.39%.
rate of return
Although the company operates on low margins, it has been able to maintain a relatively stable return on equity over the past five years. Out of the past five years, Paramount has reported an increase in ROE of more than 10% in only three years. Due to a very low reserve basis of only Rs. 200 Million Odd Crore, the company may report ROE as high as 15% in FY23.
On the other hand, the return on capital employed was only 9.3% in FY23. The reason for the low ROCE despite the high ROE was Paramount’s borrowing. ROCE increased from 8.7% in FY22 to 9.3% in FY23 as the company’s debt burden was relatively reduced.
debt analysis
The company’s debt ratio is 0.7 times in 2023. The debt burden hit a five-year high of 1.81 times in FY23, which continues to decline to 0.7 times debt obligations. The average debt-to-equity ratio is approximately 1.14 times.
Due to the continuous decrease in debt ratio, our interest coverage ratio is showing an upward trend. In FY23, the company reported a high Coverage of 7.65x in FY23, which was significantly higher than 2.28x in FY22. Here we have looked at the financial highlights of Paramount Communications’ fundamental analysis.
Fundamental Analysis of Paramount Communications – Key Indicators
key indicators Paramount Communications They are listed below.
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conclusion
Paramount Communications Fundamental Analysis Paramount Communications is an established cable manufacturer in India with a diverse product portfolio and strong customers, according to the conclusion of the article. Although revenue growth was modest, the company reported a significant increase in FY23 due to increased domestic power cable sales.
However, despite its stable returns, it operates on razor-thin margins. Decreasing debt ratio and improving interest coverage are positive factors. Paramount appears to be well-positioned in the growing Indian wire and cable industry, but its ability to improve margins and sustain growth will be critical to its investment prospects.
Written by Nasir Hussein
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