Panama Petrochem Ltd. – Value Analysis (BSE INDIA:524820) : October 6, 2017

Capitalcube gives Panama Petrochem Ltd. a score of 63.

Our analysis is based on comparing Panama Petrochem Ltd. with the following peers – Savita Oil Technologies Limited, IOL Chemicals & Pharmaceuticals Ltd., GOCL Corporation Limited, Balaji Amines Limited, Navin Fluorine International Limited, IVP Ltd and Ho Tung Chemical Corp. (524667-IN, 524164-IN, 506480-IN, 530999-IN, 532504-IN, 507580-IN and 1714-TW).

Investment Outlook

Panama Petrochem Ltd. has a fundamental score of 63 and has a relative valuation of NEUTRAL.

Fundamental Score

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Company Overview

  • With respect to peers, relative outperformance over the last year is in contrast to the more recent underperformance.
  • It’s current Price/Book of 3.38 is about median in its peer group.
  • The market expects 524820-IN to grow at about the same rate as the peers and to maintain the median returns it currently generates.
  • 524820-IN‘s median net profit margins and relatively high asset efficiency give it some operating leverage.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • 524820-IN‘s return on assets currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.
  • The company’s relatively low gross margin and median pre-tax margin suggest operations may be constrained on pricing versus peers.
  • While 524820-IN‘s revenues in recent years have grown faster than the peer median, the market gives the stock a P/E ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company is likely overinvesting in a business with only median returns.
  • 524820-IN has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

524820-IN has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 5.43% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 7.54%), and a well-cushioned interest coverage level of 7.91x, 524820-IN can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 7 peers for the company have an outstanding debt balance.

524820-IN has maintained its Quick & Able profile from the recent year-end.

  • 524820-IN‘s interest coverage is similar to last year’s high of 8.24x, which compares to a low of 3.80x in 2015.
  • Compared to 2017, interest coverage has remained relatively stable for both the company (7.91x) and the peer median (9.01x).
  • Interest coverage fell 0.56 points relative to peers.
  • 524820-IN‘s debt-EV is similar to last year’s low of 5.43%, which compares to the 2013 high of 34.38%.
  • Like the interest coverage trend, debt-EV has remained relatively stable for both the company (5.43%) and the peer median (7.54%).

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Savita Oil Technologies Limited 1.63 1.97 11.16 415.11
IOL Chemicals & Pharmaceuticals Ltd. 56.93 1.26 1.1 7.42
GOCL Corporation Limited 36.36 0.66 1.01 4.13
Balaji Amines Limited 7.88 1.36 10.12 82.15
Navin Fluorine International Limited 2.41 1.63 72.52 195.73
IVP Ltd 7.2 1.64 23.86 170.52
Ho Tung Chemical Corp. 57.22 1.71 3.13 12.72
Panama Petrochem Limited 5.43 1.43 7.91 108.08
Peer Median 7.54 1.53 9.01 95.11
Best In Class 1.63 1.97 72.52 415.11

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Company Profile

Panama Petrochem Ltd. engages in the manufacture, export and trade of specialty petroleum products. Its products include liquid paraffin oil, petroleum jelly, transformer oil, ink and coating oils, rubber process oil, automotive oils, drilling fluids, and waxes. It also develops customized products as per client specification in the field of petroleum, and feeds to various industries such as printing ink, resin, cosmetics, rubber products, pharmaceuticals, engineering, and chemicals including petro chemicals. The company was founded on March 9, 1982 and is headquartered in Mumbai, India.


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